Douglas Crockford

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February 2005

First Sale

In US copyright law, there is a doctrine of First Sale. The copyright owner can prohibit a buyer from making and distributing copies and from making public performances using the work, but cannot prevent other activities, such as loaning or renting or reselling or sharing.

The Content Industry has always been very unhappy about this aspect of the Law. A few years ago the Recording Industry tried to prevent record stores from buying and selling used records and CDs. When legal means failed, they tried illegal means. Ultimately that failed too, and today many record stores have used CD sections. Many consumers like used CDs because they are cheaper. Also, when titles go out of print, only used copies are available.

The used DVD business is growing. Sales of used or "previously viewed" DVDs shot up 72% to $658 million last year, according to newly released data from Rentrak Corp. The Studios are unhappy about this trend. Studios get no revenue from the sales of used DVDs. I suspect that the Studios include used DVD sales when they estimate their losses due to piracy. They want every individual to have to buy a new copy.

Used DVDs add to the pressure to keep prices low. Used DVDs also interfere with some marketing plans. Disney, in particular, likes to create artificial shortages. They take some of their titles off the market periodically. Then they re-launch the titles a few years later, with sales driven by demand that was unsatisfied during the vacuum. Such a strategy is less effective when used product remains in the market. Disney's strategy misfires in that it forces consumers to buy used DVDs, which is the opposite of their intention.

The Studios want to abolish the First Sale Doctrine. They have been lobbying the Congress to weaken the First Sale and Fair Use doctrines. So far they have failed, as in the Consumer Video Sales/Rental Amendment of 1983.

Now they are trying to use technology to change the law. For example, there is no law that prohibits playing Japanese DVDs on US DVD players, but Region Codes restrict it, and the Digital Millennium Copyright Act of 1998 prevents certain measures for getting around the restriction. One of the motivations behind the Superdistribution DRM schemes is to create a system that pays the Studios on every distribution, not just on the first one.

Windows

The other reason that Studios want DRM is to protect the current business model which is built on windows of exclusivity. A movie opens in theatres, then some months later is becomes available on DVD, and then later on Pay-per-view, and so on. This month, the Senate passed the Family Entertainment and Copyright Act, which makes it illegal to use a camcorder in a movie theatre. It will be a Federal Crime with a 3 year sentence. The Studios wanted the law to prevent pirate DVDs from getting to market before the legitimate DVDs. I do not think that taping with camcorders was ever a serious financial threat, but the Studios are pushing the Congress hard to get this law.

The windows are now getting shorter. The average delay has recently fallen from seven months to five. (Sony is a little quicker, Fox is a little slower.) The Studios want to reduce the delay because it allows them to receive DVD revenue earlier. Also, the shorter the window, the less money needs to be spent in marketing the DVD. Ultimately, the theatrical release and the DVD release will both be at the same time. Theatres will probably sell DVDs along with tickets and popcorn. I expect this change will happen in less than 3 years.

HVD

Optware is attempting to make a standard of its holographic storage technology. The Holographic Versatile Disc could carry over a terabyte. This puts it way ahead of Blu-Ray's specifications. They will use ECMA's TC44 working group to develop the standard. The first meeting is next month. They hope to be able to publish in late 2006. HD-DVD and Blu-Ray products will get to market way before HVD, but HVD could still win as an HD format if neither HD-DVD nor Blu-Ray is the clear winner.

I think that HVD is bad for the Studios, because larger disc capacity tends to reduce the value of bits. Consumers will expect to see more content per disc, but they are not be ready to pay more.

Macrovision

Macrovision has announced a new product, RipGuard DVD, which claims to stop computer-based DVD rippers. It works by putting intentional errors into the encoding stream. Most standalone players contain error correction which can recover, but many computer-based readers do not, and so are expected to fail.

This will significantly weaken the error correction capability of all DVD players, increasing the fragility and error rates of DVDs. The Studios may like the idea of DVDs that fail more quickly because a DVD that has failed cannot be viewed or copied or resold. They would not mind it if people had to buy replacement copies of favorite shows.

I would expect that the next generation of computer-based DVD players would have the same error correction as the standalone players, rendering RipGuard useless. Macrovision's general strategy is to develop measures that are annoying but ultimately ineffective.

PDP

Until recently, plasma was synonymous with HDTV. But now consumers have been getting comfortable with other technologies, so companies such as Sony, Toshiba, Fujitsu, and JVC are beginning to drop plasma in order to concentrate on more profitable technologies, such as LCD, DLP, and SED. Improvements in size, brightness, and viewing angle have reduced plasma's competitive advantage.

HP

Carly Fiorina is no longer CEO of HP. Fiorina said: "While I regret the board and I have differences about how to execute HP's strategy, I respect their decision. HP is a great company and I wish all the people of HP much success in the future." Fiorina has left her post as chairman and CEO of HP with immediate effect. Robert Wayman, HP's CFO, takes over as interim CEO and will lead the search for Fiorina's replacement. It is not clear yet why the board of directors pushed her out, but it is likely that there will be a significant change of direction in the company. There has been a lot of friction between Fiorina and the board, with issues ranging from operating style to financial performance. It is estimated that Fiorina leaves with $45M.

Fiorina was trying to grow HP into a Consumer Electronics company with televisions, cameras, and MP3 players. It is possible that the board felt the company was expanding too rapidly into unfamiliar and highly-competitive businesses. Some people think that Fiorina will go into politics. She could be the first woman President.

DLNA

I have reviewed the Digital Living Network Alliance's Home Networked Device Interoperability Guidelines v1.0. DLNA is a meta-standard which selects aspects of many existing standards and makes recommendations for tying them together. It is very premature, lacking many important features.

These guidelines deal exclusively with the relationship between Media Server Devices and Media Server Control Points. It does not deal with Media Renderer Devices nor with Media Rendering Control Points. A TV or monitor is an MDR, so there are significant chunks of functionality that are not covered by the guidelines.

DLNA uses IP for all communication and transport. They claim it has this advantage:

That is also a fatal disadvantage. The DLNA home network becomes a vector for delivering viruses, assault advertising, and spam programming to every digital media device in the home. DLNA will make it possible for people to experience everything they hate about their computers and the Internet with their TVs. Viruses that take over the PC will be able to take control of all home media. Viruses can change channels, delete programs, replace programs with evil programs, and possibly infect the other devices. A virus in the computer can launch a Denial of Service attack against the TV. DLNA has no security mechanism of any kind to protect the home system.

DLNA has almost no common support for UI. Since it is HTTP based, it is probably compatible with CEA-931-B and CEA-2027, but those standards are not even mentioned.

DLNA has no DRM. Even though DRM is going to fail, at this time no serious product architecture can exist without it.

The DLNA architecture depends very heavily on HTTP. HTTP is really popular, but it also one of the worst protocols ever invented. DLNA uses it for everything, including media transport. They use SOAP and XML on top of that for everything else. It is big and ugly and horribly inefficient. Perhaps that does not matter. In section 7.2.9 they state a requirement that SOAP messages must be responded to within 30 seconds, but in the comment they say that that goal can be difficult to achieve. I can't imagine placing a system in front of consumers with 30 second response times.

The DLNA Tuner specification does not know about ATSC/PSIP Subchannels. That will cause confusion with program guides and other services.

I hope that some of these problems get addressed in 2.0. The current guidelines are inadequate for consumer products.

The Digital Transition [2004 - 2005]