Revenge of the Nerds Part II: The Industry Strikes Back

You miss the days of faxes, when you could hold the paper in your hands and when things were a little slower, but you can't go back to them, you can't fall behind, you can't pass up an opportunity, and if you don't respond quickly at all times somebody else will beat you to it, even if you have no idea what it is.

-Mark Helprin, The Acceleration of Tranquility.

Like Mark Helprin's character in The Acceleration of Tranquility, the recording industry longed for the days when they alone controlled the distribution of music with an iron fist, and made a pretty penny doing it. Unlike Helprin's narration, however, they did not respond quickly to the challenge of Napster, and when they finally did respond, it was to lash out at the very technology which was changing the world of music and entertainment as we knew it. I left off this saga of the nerds' revolution with the lawsuit that brought down Napster, ultimately resulting in it becoming (as commenter Jgibby noted on my last blog) what it is today: just a second-rate iTunes. The RIAA had won, or so they thought. But often times nothing fuels a revolution like persecution, and that is exactly what the RIAA's action was perceived as by many who had grown to love Napster.

This is the story of their response.


As noted in Digital Capital: harnessing the power of business webs, "Business must provide a pertinent, attractive, and convenient total experience." The entertainment industry was failing to do this by not embracing the technology that would make that experience possible. Instead they were literally suing those who tried to create it. This was bad business, and it once again created a gap that was aching to be filled. That "fill" would come in the form of peer-to-peer networks.

As I mentioned in my last blog, Napster's unified structure (complete with a central server) made it vulnerable to legal attacks. At first, the solution was simply to make a multitude of different services similar to that provided by Napster. These were creations such as Morpheus, Limewire, Bearshare, and the original Audiogalaxy as well as many more. These all implemented similar frameworks to Napster, but each was individually smaller than Napster and so the RIAA had no single target, but what was now a series of moving targets that kept changing over time. Beginning artists who found fame through these networks (such as Linkin Park) embraced the idea of using these peer-to-peer (P2P) networks as a way for bands to get their music to a greater audience. This was changing the inherent nature of music. This easy P2P-based access to music eroded any concept of music-as-property for many people. It also gave users a previously unheard of role in distribution and production of music. The music industry liked none of this.

So they sued. They sought injunctions, copyright violation charges, and punitive damages. They even began suing not just the file sharing services, but the very people who used them. This bares repeating: the music industry sued their own fans. If you type in "RIAA sues people" into any search engine, you will see news story after news story about their litigious assaults."RIAA sues 261 file swappers"; "RIAA Sues Woman Who Has No Computer For Sharing Music"; "RIAA sues transplant patient"; "12-Year-Old Sued for Music Downloading." These headlines would seem comical if they weren't true. Although the total number of people they have sued is in dispute (some estimates put it at upwards of 35,00 people, while the industry says closer to 18,000). What is known, however, is that over 30,000 individual suits have been filed by the RIAA, and the average settlement is between $3000 and $5000 dollars. That's around $50 million in settlements alone. What is even more shocking, though, is that they are actually loosing money. The cost of litigation and the fact that many of the plaintiffs in these cases are unable to pay the full amount of the settlement at the time of the agreement, has led to a net loss on their cases. More than simply losing money, the industry is losing sight of the goals of their business, and in spite of their failure to embrace new technology, users were more than ready to exactly that in order to escape the legal battle.


In my final installment of this blog, I will talk about the technology that rose to prominence largely as a result of this misguided war launched by the RIAA. It will discuss the current technology which makes DRM so difficult; and it will provide support for Digital Capital: harnessing the power of business webs' statement that "...An oligarchy of industrial-age record companies and broadcast networks like RCA and CBS controlled the music distribution business. Today, their domination is in tatters." Lastly it will ponder the future of DRM in the years to come.

All this and more, in the third installment of Revenge of the Nerds.

Revenge of the Nerds

You might recognize the title of this blog as being the title of a 1984 movie which some of you might have been (un) lucky enough to actually have watched. I took something that the entertainment industry had created, and posted a little piece of it on the internet. If this doesn't seem revolutionary, it's because it isn't. Since the early days of the internet, people have been taking the creations of the entertainment industry and posting them on the web. What is so interesting, while watching movies about the history of silicon valley, the development of the internet, and yes, nerds, is the role the entertainment industry itself played in the world we see today. One in which, their profits continue to plummet, while those of various internet start-ups which scorned them, continue to soar.

Back in the days which the entertainment industry considers "good" and "old", music was a real commodity. CD's were expensive and pretty much ubiquitous. Often packed with a number of bad songs and only a few good ones, they were the only way for individuals to get their hands on music they had heard. Interestingly enough, however, this format would eventually be the record association's undoing. One unique thing about the CD (versus a tape or record) is that the information stored on them is digital. This didn't matter much in the beginning, but as hard-drives became bigger and bigger, and technology improved, this became an important point. It was important because it meant that it could be duplicated by a computer and transferred to another. All that was needed now, was some service that allowed people to connect and share these digital songs with one another. Enter: Napster.

A High-school dropout named Shawn Fanning wrote the code for Napster in the summer of 1999. It allowed individuals to engage in peer-to-peer file sharing over the internet with the help of a centralized server. This service was made even more effective due to the development of compressed music files (such as MP3's) that took up much less memory and so could be transferred over the internet faster and stored more easily. Now that centralized server I mentioned earlier, that would prove to be Napster's undoing. It was that centralized server that made it possible for the Recording Industry Association of America (RIAA) to launch a series of lawsuits against it. It is important, however to analyze this decision in a little more depth.

The record industry had a unique opportunity. It's own reluctance to enter the internet age and give users a more effective and efficient way of getting music led this young kid to create a program himself that allowed people to do it. At this point they could have recognized their lack of foresight, and capitalized on the opportunity. At this time there were no other file-sharing programs with that kind of a user base, so most everyone was using Napster. They had a huge number of loyal fans together in one place, using one service. If they had bought Napster and used it to put together a model for distributing music to those same fans, thing might have turned out quite differently for them. Instead, they declared war on the very music lovers who they rely on for their bottom-line. In July of 2000 Napster was crushed by a court injunction.

Obviously by looking at the state of the record industry, and what has happened to the majority of retail music stores (see: ) the battle may have been over, but the war was far from finished. All felling Napster did was cause the nerds to go and create other revolutionary file-sharing services, the results of which can be seen all around us today. It is this strategy that has put the entertainment industry on the defensive and caused them to rely so heavily on DRM technology. In my next post I will follow this saga, and explain how the nerds took their revenge.

Caring about Sharing: DRM Explained

This week, the focus has shifted to our move into an "information society". This is the perfect context from within which to discuss digital rights management. After-all, digital rights management is concerned primarily with limitations on the use of digital information. So without further ado, let's delve into the intricacies of digital rights management, which, for the sake of space (this blog post's) and time (namely, mine) I will hereby refer to as DRM.

DRM is a sort of catch-all term that is used to refer to a pretty broad range of technologies. What these all share, however, is that they exist largely to control access. This can mean hardware technology or software technology which serves to prevent or allow people to do certain things with certain digital content and/or devices. These DRM technologies make it so that end users are limited in their access, conversion, or replication of specific digital information.

This has become an increasingly difficult job. Early on, the technology available to individuals when it came to copyrighted content was fairly limited. Sure you could play a VHS tape with one VCR and record onto a blank tape with another, but you could not host a torrent tracker and share that same movie with millions of other people at zero cost to you. The later example shows that DRM is essentially up-against in this increasingly digital age.

If there is one group who has done the most in the development and implementation of DRM technology, it is the group with the most to loose: the entertainment industry. This week's topic is our transition into a digital information society, and no one has felt this more acutely than the entertainment industry. In the world we live in today, most everything we can, we reduce to bits and bytes. We reduce literature, music, art, and conversation to strings of 1's and 0's so that it can be stored, data-based, and shared through computers.

The entertainment industry traditionally dealt with a number of different mediums through which their products existed. Everything from audio cassettes to radio waves, to canvas paintings. These mediums were different than digital code, because replication was not only more difficult, but quality was usually lost. Meanwhile, in digital form, content can be replicated an unlimited number of times without any degradation. In fact, it can now even be converted and changed at will. You can take a song, burn it to a cd, then convert it to an MP3, then compress it into a zip file and send it out embedded in an email, all within 15 minutes. Another topic mentioned in this week's readings was that of the organizational structure of business being better understood through analysis of it's strategies. Well this sea-change in terms of the the entertainment medium has drastically changed the business strategies and the organizational structure of the entertainment industry.

In the past a record company could spend years and lots of money investing in a single break-out star who goes on to sell millions of CD/records throughout their career. These days, artists tend to come and go much more quickly, and revenue from cd sales must be heavily subsidized with revenue from other avenues such as live shows and merchandise. One of the major factors in these changes has been the difficulty in implementing effective DRM technology that people can't easily circumvent. It is this lack of effective tools to stop copyright violations that have caused the entertainment industry to reorganize in order to focus more on technologies which are harder to turn into digital information.

As our society becomes one in which our most monumental technological innovations have involved the use of technology to disseminate, organize, store, and create information, companies have taken larger strides to protect information upon which their bottom line is dependent. As we move forward I will introduce some of the specific examples of DRM technology, but this should give a reasonable overview of what DRM is, and why it is so important; and when it comes to this information, you are more than welcome to share.

Industrial Revolution and Ideas

Certainly the world of business in the United States prior to the 1900's
was one quite different from the business world we see today. The lack of
big businesses (due in large part to the as-yet undeveloped systems of
transportation such as the railroad) meant that it made more sense to
have local businesses than larger ones with a more diverse geographic
customer-base. We saw that change dramatically as America moved into the
20th century with technological innovations such as the railroad and the
telegraph (and telephone).

One of the things which made all this technological innovation possible was the reality of being able to own an idea. The United States had adopted patent systems in several states back during the late 1700's, culminating in the Patent Act in 1790. The concept that ideas (and by proxy, creativity) could be a source of wealth, brought technological innovation to the forefront of Western business. Ironically, though, the very idea of "owning an idea" was itself changed by a technology which it helped to make a reality.

In my next post I will explain digital rights management in more detail, but a quick synopsis is that it deals with the rights to certain creative products of the human mind that are increasingly hard to control the spread of. This has meant that in many ways, it has led America's concept of what it means to own an idea, and as we move from a newly industrialized country into an increasingly digital age, will (I believe) continue to do so for some time.