Douglas Crockford

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May 2004

This month's report focuses on the Congress, MPAA, and DVD.

Government

Since the Janet Jackson incident, the Congress has taken a larger interest in the content of movies and television programs, to the alarm of the Studios and Networks. They do not want more government interference and censorship. This month, the Senate Committee on Commerce, Science, and Transportation heard testimony on whether or not movies should be allowed to show people smoking cigarettes. There is a conflict between issues of Public Health Education and Rights of Expression.

The first copy-protection labeling bill to cover video as well as music was introduced last year by Senator Ron Wyden (D-Oregon). The Digital Consumer Right to Know Act (S. 692) would require that distributors of any digital content that contains technological features that limit the ability to play, copy, transmit or transfer the content between devices would have to disclose those limits "in a clear and conspicuous manner."

This is a weaker bill than the Boucher-Doolittle bill, but it does provide an important consumer protection. Research has shown that Consumers want to pay less for media products that come with limited rights. This bill, if passed, protects Consumers by requiring clear DRM labeling. The Studios do not like this because honest labeling could reduce the prices that the market will accept.

Hearings were held on May 12 on the Boucher-Doolittle bill, the Digital Media Consumers' Rights Act (H.R. 107). As expected, it received strong support from the CE and IT industries, and was attacked by the Studios. I cannot determine of it is likely to become law this year or not. If passed, it will amend the Digital Millennium Copyright Act (DMCA), making it legal to circumvent encryption systems for purposes of making "non-infringing" uses of a copyrighted work. It also would permit the sale or manufacturing of hardware or software products "capable of enabling significant non-infringing uses." It goes beyond Wyden in giving Consumers the same rights that they now enjoy with VCRs. I believe that mainstream adoption of Digital Television requires such Consumer rights. Most Consumers will not spend money on new digital systems that can do less for them than the old analog systems that they already own. Recall that Digital Audio Tape (DAT) failed to replace cassette tape because of the Audio Home Recording Act of 1992.

Holding up his iPod, Representative John Doolittle (R-California) said, "This is an interesting device. It can download entire CD collections, entire books for now. It may be that people would be prevented from taking advantage of this convenient technology."

Last month a bill that would make using a camcorder in a movie theater a federal crime cleared its first legislative hurdle, passing a House Judiciary subcommittee by voice vote. The bill, the Piracy Deterrence and Education Act, is sponsored by Reps. Howard Berman (D-Calif.) and Lamar Smith (R-Tex.).

In addition to banning camcorders in theaters, the bill expands federal law-enforcement power against online copyright infringement and increases penalties for large-scale file-traders. The bill also lowers the legal threshold for the criminal prosecution of online infringement by replacing the "willful infringement" standard in current law with the requirement that someone makes copyrighted files available online merely with "reckless disregard" for possible future infringement.

So Congress is trying to criminalize Fair Use and decriminalize Fair Use at the same time.

Standards

Leonardo Chiarione is the founder and chairman of the ISO MPEG committee. MPEG is the core standard in digital broadcast, cable, satellite, and DVD. Chiarione has observed that Digital Media has not achieved its goals, and so has created another group to solve the remaining problems.

The Digital Media Project is a not-for-profit organization with the mission to "promote continuing successful development, deployment and use of Digital Media that respect the rights of creators and rights holders to exploit their works, the wish of end users to fully enjoy the benefits of Digital Media and the interests of various value-chain players to provide products and services".

Chiarione has recognized the recklessness of the behavior of the Studios, and wants to specify a DRM system that also respects the rights of Consumers:

In the meantime media companies are actively lobbying parliaments in different countries to enact legislation that makes it punishable to perform actions that millions of people do every day to get and use content of their liking in the way they like it. While this is certainly justified by the existence of cases of egregious violations of right holders’ rights, one should not forget that great new user experiences, millions of users have grown accustomed to, are outlawed at the same time, without a legal alternative replacing them.

Less than a year ago these considerations were the basis of an initiative called "Digital Media Manifesto" (DMM) launched with the goal of breaking the "digital media stalemate" described above. In less than 3 months a group of experts from all over the world drafted and published the Manifesto using e-mail and WWW.

His call for balance in DRM is uncommonly reasonable.

The "technological position" is based on the assertion that, no matter what protection is applied to no matter what content, a sufficient quantity of human ingenuity of sufficient quality, seconded by an adequate amount of processing power, can remove it. From this comes the assessment of the futility of any attempt at protecting content to manage its consumption and hence its value, because, sooner or later, whatever the Technological Protection Measures (TPM), they will be removed.

I have no intention of entering a dispute on the universal validity of such an argument, but I would like to start by just stating the obvious: a poorly protected piece of content can be hacked without much ingenuity and simple computers, while a smartly protected piece of content will probably take greater ingenuity and powerful computers. I would also like to add that the position presupposes the continuation of today's content distribution model, where users buy the right to consume content independently of the machine on which it will be consumed, which I do not think is a reasonable assumption because future content may only be consumable on authenticated machines.

The last comment should not be read to mean that I am supportive of legislation proposed in some countries that intends to impose that any processing device should contain security elements. I think these proposals are damaging progress in one of the most innovative technology field of this century (and the past) which holds the prospect of unifying a lot of other disciplines and their exploitation. I am just saying that a rights holder might wish to have his content consumed only on devices with a certain level of security.

Members of the Project include University of Tokyo, Matsushita Electric Industrial Co., Mitsubishi Electric Corporation, Chinese Academy of Science. The US is under-represented. In particular, none of the Studios are members. This concerns me. Also, many DTV systems will be in place before the Project finishes its work. DRM will be a difficult feature to retrofit without obsoleting the equipment of the early adopters. Even so, this project may become important.

The Third General Assembly meeting of the Digital Media Project is in Osaka in July. The Fourth General Assembly meeting will be in Barcelona in October.

Wireless TV

Sony will ship its first wireless, Internet-enabled TV this autumn. The LocationFree TV unit is based on an LCD panel and an integrated tri-mode Wi-Fi adaptor. Sony will offer two models, one with a 12in, 800 x 600 display, the other a more portable 7in, 800 x 480 panel.

The former contains all sorts of TV-derived image processing technology to anti-alias jagged lines, provide motion compensation and offer picture-in-picture playback. There's "3D Y/C separation circuitry for clear, vivid picture and caller blur reduction", Sony said. The 5lbs unit also sports its own audio amplifier and speakers, and has its own video input ports.

DVD

Most HDTV sets in use today are being used to watch DVDs in the home theatre, not to watch HDTV broadcasts. I think adoption of HDTV will pick up significantly when a High Definition DVD player becomes available.

There are two problems that will slow the introduction of High Definition DVD. Neither is technological.

There are four formats to consider. The market will accept only one. No one wants a repeat of Betamax vs VHS, when Retailers had to stock two versions of every product, and many Consumers were stuck with the losing format. I believe that mass adoption will not happen until the Industries can agree on a single format. The US Government will not participate in settling the issue, although some other Governments have clear interests.

The four formats are

It is difficult to compare the specifications because they they are still being refined. The specification competition has already resulted in substantial improvements to all of the formats, and some convergence in their feature sets. It appears that Blu-ray will have the greatest capacity (25GB or 50GM). HD-DVD has the most market momentum, and it has the best name.

The DVD Forum thinks it can launch HD-DVD in early 2005. Sony thinks it can launch Blu-ray in late 2005 or early 2006. Sony and its 12 partners have reorganized the Blu-ray Disc Founders (BDF) as the Blu-ray Disc Association (BDA). This allows it to take on more members, which it needs to do to develop broader support.

Sources within the Taiwanese manufacturer community suggest that they don't expect to see a leader emerge for three to five years. If neither Blu-ray nor HD-DVD becomes a clear winner, the Taiwanese may attempt to win with their own format. The Taiwanese government's Industrial Technology Research Institute (ITRI) announced the Forward Versatile Disc (FVD) format, a version of today's DVD technology which ups the capacity using a red laser. FVD will provide 6GB of data on a single-layer disc and 11GB on a dual-layer disc, compared to 4.7GB and 8.5GB, respectively, for DVD.

ITRI has ties with the DVD Forum, and is thought to have submitted FVD to the organization, possibly as an interim format bridging the gap between DVD and HD-DVD. The Forum has provisionally mandated the use of Microsoft's WMV 9 format alongside MPEG 2 as a HD-DVD video data format, and FVD is expected to use WMV 9 too.

China has Enhanced Video Disc (EVD). They want a system that is free of patent fees and restrictions. China is potentially a large enough market to have its own national format. China already builds most of the world's DVD players.

The new format will "attack the market share of DVD", according to the state news agency, Xinhua. Work on EVD has been going on since 1999 backed by state funding. EVD uses a video codec, VP6, from US-based developer On2, which offers "better image quality and faster decoding performance than Windows Media 9, Real 9, H.264 and QuickTime MPEG 4", the company claims.


Any new DVD format will be DOA (Dead on Arrival) without movies. The Studios have not committed to any new format, so everything is stalled. Historically, the Studios have been reluctant to adopt new technology, even when the new technology works to their favor. (The Betamax case is a famous example of this.)

CE needs the Studios more than the Studios need CE, so the Studios are using their leverage to get DRM into the new format, as well as other concessions. However, if CE can get a successful player to market, with an expectation of rapid adoption, then the Studios will fear the missing of a market opportunity more than they fear piracy, and will adopt.

This situation may favor Sony. Sony is both an CE Manufacturer and a Studio. It can commit to bring the Sony Pictures catalog to Blu-ray. This will not guarantee success. The other Studios might be threatened by such a move and adopt another format. The Market will not accept two formats, so ultimately Sony would be forced to abandon Blu-ray.

China's EVD is a real threat to the whole DRM concept. The DVD Copy Control Association's CSS (Content Scramble System) technology has failed to prevent piracy. This is because it is technologically impossible to prevent copying. Pirates will be able to remaster DVDs into EVDs and distribute them all over China and the World. It may be harder to move HD material into EVDs without causing image degradation. Even so, it will be better picture quality than is available with DVD.

It seems unlikely that the Studios will be able to convince the US Government to go to war with China over movies. A better alternative would be to pressure the DVD Forum to dedicate its patents to the public in order to promote HD-DVD as a single global standard.

MPAA

The Motion Picture Association of America (MPAA) was founded in 1922 as the trade association of the American film industry. It represents the seven major Studios: Disney, Fox, MGM, NBC Universal, Sony, Time Warner, and Viacom. MPAA is best known for the establishment of a movie rating system (G, PG, PG-13, R, NC-17) in 1968.

Jack Valenti was born in Houston, Texas. He was an advertising and political consultant, and then became a speechwriter and congressional liaison for Lyndon Johnson. (In 1963, on the plane carrying assassinated President John Kennedy's coffin, he stood next to Johnson when he was sworn in as President.) Valenti became President of MPAA in 1966. Comfortable in both political and showbiz circles, he has been an energetic lobbyist for entertainment and media issues.

Valenti led the fight of the Studios against the VCR. In 1982, testifying before the House Judiciary Committee, Valenti said "The growing and dangerous intrusion of this new technology is to the American film producer and the American public as the Boston Strangler is to the woman home alone." It turns out that he was totally wrong. The VCR did no harm to the American film producer or the American public. Quite the opposite. The Film Industry is healthier than ever because of the VCR. Home Video has significantly increased Studio revenues by creating richer marketing opportunities. Over 20 years later, Valenti is still unable to admit that he was wrong. He continues to complain about loses due to illegal copying, while at the same time ignoring the increases in profitability that were due to the VCR.

The Broadcast Flag was proposed as a device to appease Valenti. "We are now arming ourselves to use legitimate technology to defeat illegitimate technology," said Valenti. See the Broadcast Protection Discussion Group. Valenti continues to misrepresent the impact of Broadcast Flag on consumers in statements such as this: "The FCC scored a big victory for consumers and the preservation of high value over-the-air free broadcasting with its decision on the Broadcast Flag."

Valenti went to Washington on May 12 to testify against the Boucher-Doolittle bill, saying "The honest people will do right, but dishonest people will not do right and, in the digital age, that is a devastation I just don't want to comprehend" and "It legalizes hacking. It allows you to make a copy or many copies. And the 1000th copy of a DVD, Mr. Chairman, is as pure and pristine as the original. You strip away all the protective clothing of that DVD and leave it naked and alone." Valenti is expected to retire this year.

IFPI

The music industry is becoming increasingly hostile to consumers. A man was jailed for three months by an Athens court for buying two illegal CDs, according to the International Federation of the Phonographic Industries (IFPI). BCC reports that the millions of holidaymakers going to Greece this summer have been warned they could be jailed for buying CDs.

IFPI spokesman Ion Stamboulis said: "This is not a symbolic measure. We are determined to prosecute the buyers and we have the support of the authorities."

About 1,000 vendors have been prosecuted during the past few years, but this is the first time a buyer has been jailed.

"Until now, we were focusing on the sellers, but Greek courts generally hand them light suspended sentences and they resume their trade as soon as they are released," said Stamboulis. He said production and distribution were virtually controlled by what he called a "Nigerian mafia". He said he expected a big surge in pirated CD trafficking during the Olympics from 13 - 29 August.

I predict that if IFPI causes the arrest and punishment of tourists during the Olympics that the backlash will be enormous, and the music industry will come under extreme criticism. This could cause unwanted attention for DRM.

Netflix

Netflix is the world's largest online DVD movie rental service offering more than two million members access to more than 20,000 titles. Its appeal and success are built on providing the most expansive selection of DVDs, an easy way to choose movies, and fast, free delivery.

For $21.99 a month, members rent as many DVDs as they want and keep them as long as they want, with three movies out at a time. Members enjoy free and fast delivery. Netflix reaches more than 80 percent of its subscribers with one-day delivery and provide free, pre-paid return envelopes. With no commitments, members can cancel anytime. Their "no late fees, no due dates" online movie rental model has eliminated the hassle involved in choosing, renting and returning movies.

Netflix has redefined the economics of On Demand. Using the oldest of delivery systems (the postal service), Netflix offers better convenience and value than current electronic delivery systems. I believe that ultimately Netflix loses to broadband with large capacity DVR. However, if DRM is too onerous, Netflix may still win.

The Digital Transition [2004 - 2005]