Monday, September 30, 2002

P2P and the Press

Here's a Lessig friendly piece on Eldred vs. Ashcroft in Businessweek, of all things, as well as a note saying Berman and Coble (sponsors of the Media Cartel Vigilante bill) are surprised there's opposition. Perhaps the start of this New Yorker piece sums it up best -- public-interest unfriendly legislation happens because the public generally shows no interest. Pre-Internet, it would be hard to organize folks interested in protecting the Internet, and tracking hostile legislation.

XBox fantasies continued

EG wrote in about my recent post on the XBox arguing that there was something more to Microsoft's entry into the console bizness than self gratification. He pointed to a rather excellent k5 article outlining how the XBox, like Palladium, is a DRM system for secure, restricted content deployment, and as such competes against Sony's PS2.

He raises an excellent point. While Microsoft touts Palladium as saving consumers from SPAM, in reality it does no such thing and instead creates a safe environment for content vendors to deploy their wares. Never say Microsoft doesn't support its developer community. The fact that such an environment would exclude GPL'd software (because its security cannot be similarly gauranteed to Hollywood) is an accidental, but fortunate, by-product of providing a safe platform for content vendors.

This whole topic raises many issues, including just how importance "convergence" is going to be, the opportunity for collusion in standards settings, and how economic rent might be split between a secure platform vendor and content vendor. I'll deal with them in individual posts in the days to come.

Saturday, September 28, 2002

XBox fantasties

I'll be honest: I think Microsoft started XBox because a bunch of managers really like playing computer games and thought it would be a wheeze. I fail to see how it uses their desktop monopoly or helps reverse integrate Windows into the server (which is what Hailstorm, .NET, Palladium, and XP do). People talk vaguely about "taking over the living room" but I don't see any economic drivers behind that at all. And I don't think XBox Live (ie. connected to the internet) will correct this.


If you can appropriate rent after locking in an installed base, and if you have large "demand side" positive externalities, it can make sense to wink at pirates. When Microsoft selectively chooses to crack down on piracy, it's price discriminating between corporations (who can pay) and individuals (who really cannot). Having a larger installed base gets those positive externalities kicking in and allows the company to charge more to those who can pay.

This Salon article talks about Microsoft now allowing piracy in China. This is a direct result of the Chinese government threatening to switch to Linux, forcing Microsoft to essentially cut its prices (by allowing unauthorized copying).

Wednesday, September 25, 2002

Opera 6 Mac beta out

Perhaps the wait for a great OS X browser is almost over. Opera shipped the beta for version 6 today, and so far it seems rough, but promising.

Tuesday, September 24, 2002

Movie industries collude

Intertainer wants to deliver movies to people through the Internet. It will fail, because the Internet is a lousy distribution channel for movies, but in the mean time their CEO is accusing the movie studios of collusion because they refuse to license him their content.

This whole thing is weird. Firstly, one of the promises of the Internet was that it made publication easier, allowing content to get directly to end-users with fewer intermediaries. Intertainer seems to be complaining because studios might sell their product directly to end-users and cut out the middleman--but in my book that sounds good for consumers.

Secondly, an integrated content production and distribution company has every economic incentive to distribute other peoples content, or license out its own. People worry about media consolidation, but this sort of discrimination is not a good reason to.

So why are studios slow to license? Part of the reason is to prevent a distribution industry that forces the upstream content owners to compete. In the CARP process we saw the government step in to write and enforce the collusive agreement between music content owners (RIAA), but so far that has not happened for movies. And while studios may have enough discipline to refrain from price competition, they may not be able avoid non-price competition so long as Digital Restrictions Management systems remain undetermined.

For example, movie studios might want to keep their hits tightly locked up, but care less about flops. Even if they charge the same price for every movie, they might make the flop more attractive by loosening up whatever Digital Restrictions Management scheme they tie it up with, such as regional encoding, for example. Without a baseline Restrictions regime worked out in collusion and enforced throughout all digital distribution channels, the MPAA will not release content--leery of possible competition down the line.

Batt caves on copyrighting silence

Maybe the laws are different in the UK, but according to my understanding of American copyright law, copyright protects the expression of ideas, not the ideas themselves. So why Batt capitulated (NY Times) in his stand against Cage for copyrighting silence is utterly unclear. The Times/AP article is full of empty doublespeak.

Netflix vs the Internet

Recently, I wrote how the Internet is a lousy channel for movies. The NY Times has this article on how the VOD dream was being fulfilled through the post office. Andrew Odlyzko (my favourite telco guru) estimates that NetFlix alone ships about 1500 terabytes of data a day, within spitting distance of the 2000-4000 terabytes shipped a day on the Internet itself.

Monday, September 23, 2002

Copyrighting silence

My friend CD sent me this clip on how John Cage's estate is suing British composer (and more importantly, Wombles composer) Mike Batt for his "One Minute of Silence" infringing on Cage's "4' 33'" of silence. Copyright protects expression, not the idea itself (unlike patents) so conceptual art (such as 4' 33) probably has very little protection. The description of the courtroom performances are very funny

All Your Bits are Belong to Us

As anticipated, Microsoft has begun to integrate the Digital Restrictions Management systems built into XP through hardware output devices. Creative Labs' sound cards are no longer on your side.

Eldred v. Ashcroft

The LA Times has a long, and very good, article on the upcoming Eldred v. Ashcroft case in which Lessig will challenge the consitutionality of the Mickey Mouse Copyright Act, which extended (retroactively) the term of copyright by 20 years. I'll be interested in polling some U Chicago Law professors on this when term starts, but until then here are some old notes on the economics of copyright.

The Internet is a lousy delivery channel for movies

Dan Gilmore interviews Motion Picture cartel heavy, Jack "Boston Strangler" Valenti on why Hollywood wants to kill the Internet. What emerges is the expected "no, Hollywood likes the Internet, except it must change to a broadcast medium instead of this irritating empowering users thing".

I visited this house in South Dakota that must have had 100 gigs of TV shows and movies on various hard drives scattered around the home network. It also must have had about 200 (bought) DVDs also, piled in every corner of the room. When I asked "why do you buy so many DVDs when you can just download them off the Internet" they said "quality's way better on DVDs".

And there you have it. The internet is a *lousy* medium for distributing video. It's too slow, it's too lossy, and it's too prone to congestion. If you compress video to where it can be sent in under 5 hours through a broadband connection (contrast this with the 20 minute trip to the local blockbusters) it looks awful on the TV and sounds worse. Unlike music, packet based distribution is a poor way to transmit movies. Hollywood has nothing to fear from the Internet, except people are finding out faster that its movies suck.

On an unrelated note, the NY Times has a good article on how broadcast TV is doing fine even as cable viewership grows. People seem continually surprised to learn that they are not broadcast TV's customer, advertisers are, and advertisers want scale, i.e. national distribution.

To be honest, all this talk about "targetted advertising" is kind of balony. If an advertiser knew everything about me, I don't think they would have a clue how to make a better ad. Yeah, you'll probably do better selling detergent to women and trucks to men, but after that I think the marginal return to information starts to fall pretty quickly. So while cable may offer niche eyeballs, the Tides and Fords of the world just want to hit everybody, and national distribution is the way to do it.

Stock Options

Fortune has a silly article on options, arguing that they should go to more rank and file employees because "ownership creates a sense of belonging, an egalitarian meritocracy that makes a difference every day on the job." This is even more asanine than it looks on its face -- earlier the article argues (sensibly) that options should be expensed and benchmarked against broader indices.

Options should be expensed because they're expenses--they dilute ownership and thus reduce earnings per share, which is what expenses do (curse them!) They should also be tied to indices because you want to reward relative, not absolute, performance. Rewarding a lucky dud in a boom is as bad as punishing an unlucky star in a bust. But at this stage, what with all the expensing and indexing, you might as well hand out equity, because options are behaving in almost the same way (and equity has the added benefit of not making volatility more valuable).

So why shouldn't options be given to the rank and file? Firstly, these new expensed options are going to replace some salary, and many rank and file employees may prefer cash now instead of (dubious) options in the future. Most importantly, if CEOs are largely at market's mercy with respect to how their company performs, regular employees are even more so. The average baggage handler at Southwest knows that his performance on the job has no bearing on the company's stock price, and therefore the value of his options. The motivating effect option based compensation has on his is zero, in that it utterly fails to tie his actions to his rewards. As soon as United's employee/owners finish striking, it'd be nice to ask them about their sense of corporate solidarity.

Friday, September 20, 2002

Best Browser for Mac OS X.2

I've had enough of Omniweb's stupid bookmarks and constant crashing. I hate Mozilla and IE's bloat. Opera for OS X beta cannot handle Yahoo! (a very standards non compliant site) and Chimera has lousy keyboard control. I'm back to running Opera 5 under Classic. God bless its zippy little heart.

Salaries at in 2002

A friend of mine worked at Amazon over the summer, and spoke about how it still ran itself kind of like a startup, and expected employees to work long hours for below market wages. While this was fine when the company could credibly promise growth (ie. lots of money and advancement in the future) it doesn't work so well anymore.

An individual's wages sit somewhere between his productivity (on the high end) and his next best opportunity (on the low end). After all, no matter what anyone says, you cannot pay someone more than their marginal productivity -- it means you're losing money for every hour that person is your employee. Similarly, no one willingly needs to work for worse than their next best opportunity because (by definition) they can always change to that.

An employer can gain economic advantage by paying below market wages if he promises growth (ie. lots of money in the future). This is clear in option-laden tech companies, but it's also been used by other growth companies, such as Southwest and Enterprise Rent-A-Car. "But!" I hear you economist argue, "an employee willing to defer wages merely asks for more money in the future. If you discount those future wages back to the present, their net present value is the same as a competitive wage would be now." (This means that since money in the future is worth some (less) money now, people who defer cash now will have to be paid more in the future to agree to do it, and the whoe thing ends up being a wash.)

The real profit (economic rent) is made in the little gap after when a company breaks its promise (stops growing) but before employees bid up their wages. It sonuds like Amazon's hit the stage now where no one is under any illusions about its growth prospects (OK, but now fantastic) so want to be paid market wages now.

Thursday, September 19, 2002

GNU/Linux on the desktop

When I spoke to Red Hat CEO Matt Szulik less than a year ago about GNU/Linux on the desktop, he told me that people buy applications, not operating systems, and that they were competing against other UNIX vendors for the server. When I asked Irving Wladawsky-Berger who helped bring GNU/Linux to IBM the same thing he said "if it doesn't run MS Word, nobody's interested." Months later, both Red Hat and Sun are pitching corporate desktop Linux.

Last I checked, GNU/Linux still can't run Word, or Excel, or connect with MSFT Exchange Server for email (although Ximian is working on that). As expensive as MSFT software is under License 6.0, I still struggle to see many corporate desktops switching over.

Consumer Electronics Association vs. Media Cartel

Carl Shapiro, president of the Consumer Electronics Association, gave a good speech critisizing the content cartel's scorched earth campaign against the Internet and personal computers. The points he makes will be familiar to anyone following this issue, but it's nice to see organized trade lobbies get into the fray (who thought I would ever say that?)

In particular, he compares the recording industries fortunes to that of the telco sector, or PCs, pointing out that CD sales remain remarkably brisk when so many technology industries are struggling.

Wednesday, September 18, 2002


I've added an RSS feed to this blog, so you can subscribe to it through various aggregators. You can subscribe to this RSS feed by pasting this URL: into your news aggregator. If you want to learn what RSS is, click here.

Yahoo! loses it The IT industry has pinned its hopes on broadband and (foolishly) hopes that exclusive content will be what drives adoption. Yahoo! has hired former Hollywood exec, Terry Semel, to lead their new broadband effort which will focus on compelling content to get people to sign up.

I am very pessimistic.

Online, how a site feels is more important than how it looks, and Yahoo! was always had fast, simple designs that worked. Unfortunately they decided their real customers were advertisers, and so, as cash became tight, cluttered up their previously slick pages with annoying banners. It looks like they've resolved to clean up that inconsistency by abandoning page speed altogether and embracing media-centric slow pages in the beleif that inflicting pain on low-bandwidth users will get them to upgrade to broadband, just to make the badness stop.

The one thing that is (sort of) right is the renewed focus on selling services to end users, who were always their *real* customers. Unfortunately, Yahoo! seems to think that "rich, compelling media" is what they need to sell instead of good experiences that serve customer needs. And this notion that people aren't buying broadband because there's no good content for it is flat out wrong. Broadband growth was over 90% last year and as prices fall further, more people will sign up.

Monday, September 16, 2002

Do you feel lucky? Funny musings on the outcome of Eldred v. Ashcroft.

Nice! Just got my Airport network working at home. It was incredibly easy to set up, and it rocks. Oh, and I just downloaded Watson and found it far superior to Apple's derivative Sherlock 3. I recommend checking it out.

RSS News feeds Given the ongoing flakiness of SPAM, I'm considering adding an RSS newsfeed to winterspeak. At the very least, now that I have OS X, I should try a newsreader to see how it compares to the rather wonderful bookmark system Opera sported on OS 9. Mark Pilgrim recommends Net Newswire and so far it works well.

Thursday, September 12, 2002

Initial thoughts on OS X.2 I've spent many hours trying to get OS X.2 Good 'n' Easy. It's finally looking pretty good.

The text-expander, Type-it-4-Me is almost ready for OS X and so far works pretty well. It even remembers your old settings, which is nice. HotApp is a good task switcher, and my F-keys are bouncing me between the Quintet again (text editor, emailer, calender, browser, and file manager).

BBEdit is wonderful, as always, and Now-Up-To-Date also has a fine OS X version. I didn't like iCal, to be honest, because it didn't assign tasks to particular days nor show times next to events. Useless., on the other hand, is a good replacement for the fondly remembered but now defunct Claris emailer.

I am OK with the Finder so long as I'm not trying to save something within a program. Navigating the menu tree to save something in columns mode is painful. And I am fine with Dock (unlike many) although I think it improves with HotApp and LaunchBar. I'm finding that the Quintet are not enough in this world of IM, Sherlock/Watson, terminal, RSS etc, but the Dock+HotApp+LaunchBar and the F-key linked Quintet give me instant keyboard access to everything important.

On the ugly subject of browsers, I find myself dissatisfied with both I.E. and OmniWeb. IE is sluggish, and OmniWeb has terrible keyboard navigation. Again, I like Opera best of all, except it fails to render buttons in Yahoo! Mail. This is quite a serious problem, as I use Yahoo! Mail fairly often. Opera for OS X is still in beta, and I expect great things when it moves to 1.0.

Enough trying to recapture the past, onto the future -- why is OS X better than OS 9? Firstly, I am stunned by the abuse I can throw at it without it crashing, or even slowing down much. iTunes, 20 browser windows, terminal, calender, email, iPhoto, Word, Excel etc. etc. can all be running at the same time and the system seems fine (and iTunes keeps playing nicely through my shiny silver JBL Creatures). iPhoto is fantastic with my Digital Elph camera, and I am looking forward to stringing together the movies (!) I took on it into something burnable using iMovie.

Also, networking is a breeze. Plug it in, and it goes. Very nice as my Locations Manager and Dialer become ever more complicated in OS 9.

Oh, did I mention it never crashes. Nor even slows down much?

Finally, given the Unix core, I look forward to moving my newsletter off SPAM! and onto something handled with a perl script and some flat files, triggered by Cron. *Nice*.

I think overall OS X is a fantastic system. I look forward to it continuing to develop and delivering more power to end users when other OSes are just taking it away.

Saturday, September 07, 2002

Hollywood vs. the Future Here's a really nice article chronicling the legislative battles between MPAA+RIAA and IT+world+dog. Well worth reading.

Sunday, September 01, 2002

Heading west I'm going to South Dakota for a week to unplug. So, no posts for a week. Also, the mailing list system I use for newsletters is down, so no newsletters until that comes back up :(