August 20, 2004 | By Donna Wentworth

Why Big Media Should Raise a Toast to the Grokster Decision

In an ongoing discussion on the Pho list, Cherry Lane CEO Jim Griffin hits the nail on the head explaining why yesterday's decision (PDF) in MGM v. Grokster is a boon for rightsholders:

Here's why you should applaud today's decision: It brings us closer to monetizing peered sharing and putting real money in the pockets of artists, labels, publishers, and other rights holders. How? Because it moves them one step closer to the correct judgment, which is that it is now impractical and inefficient to control the quantity and destiny of digits -- especially so those that carry mass media like music -- in the increasingly friction-free world of digitization. When that judgment is drawn, service licensing begins. Until that judgment is drawn, product-based control continues in vain. Publishers long ago accepted technology and license it today -- they licensed Napster -- and their revenues are climbing; sound recording companies continue to resist every new technology and refuse to license, and their revenues are falling. This decision will benefit the music business the same way getting arrested for drunk driving benefits an alcoholic, summoning forth the day of reckoning and hastening rehabilitation.

This judgment doesn't destroy distribution -- it enables licensing. How? It reminds one of the parties in the licensing battle that one of the vines it was relying upon to to cling to the past will no longer be viable. Hyper-efficient delivery destroys distribution, meaning that the just-in-time delivery of digits will eventually destroy their distribution entirely. That is a ways off, but from what I'm hearing back-channel it is not too far off, as Apple prepares its tiny wireless iPod with no hard-drive but enhanced Wi-Max (metropolitan-wide high-bandwidth wireless) connectivity; it won't destroy downloading over night, but it will take a whack at its market share, and slowly but surely shift the market away from distribution/downloading and towards delivery/streaming.

[...]

Technology should proceed apace, unfettered by the clumsy, blunt tools of lawyers and their DRM merchants. Licensing should shift to logical control points, like the network operators who profit from digitization. This decision points in the correct direction, as will be those that pin financial -- not criminal or other liability -- on network operators. Ultimately, there is a licensing solution that delivers flat monthly fees into pooled compensation systems that grow the incentive to create, and the sooner we get there the better. It was the answer to acoustic becomes electric, and it is the answer to electric becomes digital.

That's just a taste of what Griffin has to say. Read on below for his complete commentary:

Your response to today's decision affirming the Grokster decision is reminscent of the content industry reaction to Universal/Sony with regard to Betamax: It lacks imagination and vision. This decision will ultimately be as good for music as was Betamax for movies, dragging the reluctant half of the music business to a party that's giving raises to publishers and growing music's mindshare on countless new devices and service businesses, much as did the Video Cassette Recorder's legal battles in the late 70's and early 80's.

1. Do you think the decision today will change the number of people file sharing either way? Do you think it will increase peered sharing? Do you think the opposite decision would've decreased peer sharing? If you think it would have the effect of increasing control and reducing file sharing, please explain why you think so, given that Napster's judgment led to increased file sharing, and the trend has technology morphing to adjust to control attempts and to obviate their impact. I don't think it will change the number of people file sharing at all, and it has nothing to do with the "threat" posed by CD copying, which is promoted by, amongst others, Universal and Sony and record store owners who sell the blank discs.

2. Don't you think the Napster judgment led to the decision today, especially if you've read today's decision and the roadmap it drew from Napster's centralized approach to the new decentralized approach? If today's decision went the other way, wouldn't the impact be the same: Increased development of legal control circumventions, like the audio Tivo?

3. Here's why you should applaud today's decision: It brings us closer to monetizing peered sharing and putting real money in the pockets of artists, labels, publishers and other rights holders. How? Because it moves them one step closer to the correct judgment, which is that it is now impractical and inefficient to control the quantity and destiny of digits -- especially so those that carry mass media like music -- in the increasingly friction-free world of digitization. When that judgment is drawn, service licensing begins. Until that judgment is drawn, product-based control continues in vain. Publishers long ago accepted technology and license it today -- they licensed Napster -- and their revenues are climbing; Sound recording companies continue to resist every new technology and refuse to license, and their revenues are falling. This decision will benefit the music business the same way getting arrested for drunk driving benefits an alcoholic, summoning forth the day of reckoning and hastening rehabilitation.

4. This judgment doesn't destroy distribution -- it enables licensing. How? It reminds one of the parties in the licensing battle that one of the vines it was relying upon to to cling to the past will no longer be viable. Hyper-efficient delivery destroys distribution, meaning that the just-in-time delivery of digits will eventually destroy their distribution entirely. That is a ways off, but from what I'm hearing back-channel it is not too far off, as Apple prepares its tiny wireless iPod with no hard-drive but enhanced Wi-Max (metropolitan-wide high-bandwidth wireless) connectivity; it won't destroy downloading over night, but it will take a whack at its market share, and slowly but surely shift the market away from distribution/downloading and towards delivery/streaming.

5. [A Pho list participant] asks if this makes INDUCE more or less likely. Again, it doesn't matter. Pass INDUCE or reject it, the number of people file sharing will not change. Consider that we have special laws against both viruses and SPAM. How are they working? And the task of stopping them has the approval of the average person, where clearly the average person likes file sharing. We will not successfully code, contract, cajol or criminalize friction back into a friction-free world. But just for grins, sure, it makes INDUCE more likely because it will likely quadruple entertainment industry spending on politicians, though this will make no difference at all for the average person regardless of the money spent, the laws passed or the revenuers (FBI agents) deployed. The answers all lie with business people making licensing decisions, not with attorneys or other control agents.

Technology should proceed apace, unfettered by the clumsy, blunt tools of lawyers and their DRM merchants. Licensing should shift to logical control points, like the network operators who profit from digitization. This decision points in the correct direction, as will be those that pin financial -- not criminal or other liability -- on network operators. Ultimately, there is a licensing solution that delivers flat monthly fees into pooled compensation systems that grow the incentive to create, and the sooner we get there the better. It was the answer to acoustic becomes electric, and it is the answer to electric becomes digital.


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