Saturday, February 10, 2007

Open Letter by Bennett Lincoff to Steve Jobs and Mitch Bainwol regarding DRM and digital music

The following is an open letter that was sent by New York copyright attorney Bennett Lincoff to Steve Jobs and Mitch Bainwol, which Mr. Lincoff has been kind enough to share with "Recording Industry vs. The People". Although the letter is not about the litigations per se, I thought it would be of interest to my readers, in that it seeks to point the music industry towards the future, instead of its present obsession with the past. I.e. towards 'getting a life'.

An Open Letter to Steve Jobs and Mitch Bainwol prompted by their recent statements regarding the role of DRM. Posted by Bennett Lincoff.

Mr. Jobs says that DRM cannot effectively protect recorded music when it is transmitted digitally. He is right. The music industry’s many experiments with DRM have all met with effective technological countermeasures. Moreover, news of each successful hack quickly found its way to everyone who cared. There is no reason to believe that the results will be different next time, or ever.

For his part, Mr. Bainwol insists that DRM is essential to the music industry’s survival in the digital age.

The problem is that the Internet is fundamentally incompatible with the music industry’s traditional sales-based revenue model. Through the Internet, the market for sale of individual recordings can be saturated in a moment’s time and without payment of any royalties to songwriters, music publishers, recording artists or record labels. Neither law, nor technology, nor moral suasion will change this fact.

Mr. Jobs suggests, and I agree, that DRM should be abandoned as a tool for the protection of recorded music. However, before Mr. Jobs can implement his DRM-free utopia, the music industry must have a viable alternative business model by which it can continue to thrive. Mr. Jobs has not suggested one. Mr. Bainwol denies that one is needed; intending, instead, to continue efforts to preserve the industry’s sales-based revenue model. In any event, in the absence of an alternative business model suited for digital transmissions of recorded music, Mr. Bainwol cannot even begin to discuss the possible elimination of DRM.

I propose such an alternative in the attached White Paper(pdf).

Mine is a comprehensive approach to rights licensing and rights management that does not depend on the efficacy of exclusionary DRM technology for its success. A solution that simultaneously protects the integrity of copyright, promotes technological innovation, facilitates the growth of all manner of licensed digital audio services (including P2P), and meets consumer demand. In the aggregate, music industry rights holders would do no less well financially under my proposal than they do now under the system that my proposal would replace.

With this alternative business model in hand (which includes a plan for its implementation), there can be no further justification for the music industry’s failure to respond constructively to the changed circumstances imposed on it by emergence of the global digital communications network.

ABOUT MR. LINCOFF: Mr Lincoff is an intellectual property law attorney, consultant and writer with more than twenty years experience in the music industry.

Commentary & discussion:

Heise Online (Germany)

Keywords: digital copyright online download upload peer to peer p2p file sharing filesharing music movies indie label freeculture creative commons pop/rock artists riaa independent mp3 cd favorite songs


Alter_Fritz said...

The industry is now held
in such low esteem that otherwise law-abiding consumers find it far too easy to
rationalize what is, by current legal standards, simply stealing, and nothing more.

Thanks Ray for the link, this guy lost me after the fifth sentence where he confused copyrightinfringement with stealing.

He is either NOT the smartest lawyer when he does not even understand basic differences in legal terms or just another brainwashed mouthpiece for the labels!
So can you please provide me for free with an executive summary of his great Plan that spans over 20+ pages?


recordjackethistorian said...

The author misunderstands the nature of the Internet. He sees it as a place that can be quantified, calculated and predicted. None of that is true. He talks about streams or broadcasts having a beginning point and end point, all of which is needs to be accounted for.

He obviously doesn't understand multicasting where there is a single starting point and an infinite number of end points. Multicasting on the Internet is more akin to radio broadcasting when any number of people can listen to any signal they can receive.

I doubt the situation that the concept of copyright finds itself now, is solvable by this simple a solution. This simply attempts to retain all the players in similar roles instead of finding a whole knew way of communicating the arts on the Internet.

a.k.a. RecordJacketHistorian

Scott Ferguson said...

I think Mr. Lincoff has written an interesting paper which offers a lot of useful background that can be used as a point of departure for discussion. It's 28 pages, and I haven't taken the time yet to give it a thorough critical reading. I will, though.

Having scanned it, I can see two problems right off the bat:

1. Dismissal of what he characterizes as a "sale based" business model. I think this terminology is inexact. The music industry will always be selling something. Selling the right to listen to a song is still selling something, just as selling a CD is selling something. Consideration is paid for a product or service.

2. Again, having only scanned his article, his proposal seems to rely heavily on delivering content by internet streaming; and managing the revenue flow by cumbersome rights and revenue management mechanisms. Streaming for real-time use is a technically inefficient use of the internet, and hamstrings the consumer for repurposing the content in creative ways (mixes, mash-ups, etc.) This is the way people want to use content, regardless of whether it's "legal" or not; and will be a point of consumer pushback. Lincoff's proposal doesn't seem to address this. Moreover, creating new and cumbersome bureaucracies to manage revenues and rights is inefficient. It will deliver less money to content producers than other alternative business strategies.

What strategies? Here's one I think the major labels should look at. It is based on the following premises:

First, consumers, when given a choice, will prefer the convenience and quality of a reasonably priced "legal" source for music files over an illegal "free" source. The success of iTunes proves this beyond question.

Second, consumers want the freedom to repurpose the content they have purchased. DRM gets in the way of this, making legal sources less attractive than illegal ones.

Third, consumers don't want to be connected to the internet all the time. They want the option to consume their content off-line in a variety of ways.

Fourth, music industry producers need to lower their price points substantially to compete with illegal sources, while retaining or increasing the revenue-per-minute (RPM) for their content. They can only do this by drastically shrinking their cost structure for delivering content, while enhancing their revenue through complementary or follow-on sales.

So here, in a nutshell, is a model strategy:

1. Sell all content manufacturing capacity that hasn't been fully depreciated. Rely on contract manufacturing of media to supply the stores until they finally go out of business.

2. Go to Congress to seek an antitrust exemption that would allow competing companies to deliver content through commonly-owned channels. There is precedent for this in legislation that allows newspapers joint operating agreements in distressed markets.

3. Either buy Apple, Inc., or create a competitor to iTunes. The recording industry doesn't owe Steve Jobs a living; and third parties such as Apple take a significant cut out of recording industry profits.

4. For in-store sales, create Custom Manufacturing Kiosks (CMKs) to burn CDs on demand -- and also load iPods, Zunes, and key drives. CMKs enable tight control of revenue flow and rights management. They also enable immense broadening of the distribution channel, reduction of cost (revenue per square foot of retail space will skyrocket), and generation of follow-on sales (certified blank media, certified key drives, artist affinity items).

5. Amend the DMCA to assure that copyright is not diluted due to lack of defense. Require public domain to be explicit.

6. Stop attacking consumers with driftnet lawsuits. Consumers are not your enemies. Instead, focus litigation on for-profit illegal distribution.

Following this six-point strategy will (a) reduce the cost structure of distributing music while retaining and enhancing the profit, (b) enable consumers to use content the way they want to, and (c) make defense of copyright violations more focused, meaningful, and productive.

I would write more, but then I would be writing my own white paper. If you live in the NYC area and want to discuss the future of the music industry, write to me at

StephenH said...

I beleive it is past time for the music industry to change its tune about DRM. A member of the interactive advisory board said that DRM "allows piracy to offer something the industry isn't". I feel that it is now time for the industry to match what piracy is offering legitmately.

I feel that changing its business model is good;. After all, licensing non-DRM downloads collectively may be what is needed to make music affordable online, and allow consumers to easily access the catalog of music that the original Napster once offered. I predict that if the industry followed Bennett Lincoff's recommendations, they could easily come up with a license that Kazaa, Blubster, Limewire, et al could use and we could end this lawsuit campaign against consumers forever.

Anonymous said...

Some more discussion on that topic here:

Alter_Fritz (to lazy to log in if i don't have to) ;-)