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Good Morning Silicon Valley





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Posted on Tue, Sep. 09, 2003

Music industry to recoup alleged file-sharing losses one 12-year-old at a time




Does the Recording Industry Association of America really believe that suing millions of file-sharers is going to inspire them to buy more CDs? Apparently so. On Monday the RIAA, hardened by years of CD price fixing, made good on its threat to sue alleged file swappers, charging 261 of them with "egregious" copyright infringement, potentially worth millions of dollars. Among them, a 12-year-old New York City girl. The lawsuits were filed in federal courts throughout the country and are likely to be followed by thousands more in the coming months. "Nobody likes playing the heavy and having to resort to litigation," said RIAA President Cary Sherman. "But when your product is being regularly stolen, there comes a time when you have to take appropriate action."

The first rule of life is also the first rule of business: Adapt or die. And if you choose the latter, be sure to sue your customers first...Today, many are looking askance at the RIAA's latest action. Some say the recording industry itself is to blame for the sharp decline in CD sales (see "Decline in CD sales apparently unrelated to proliferation of lousy music"). Others believe there are better ways to solve the peer-to-peer dilemma than alienating customers. "They're resorting to these kind of bullying tactics where they're suing individuals, families, threatening them with bankruptcy, and trying to intimidate them into coming back and being customers," EFF staff attorney Jason Schultz told Tech TV. "The real question will be: Are they serious about continuing to wage this war? I think this first effort will shock some people, but I don't think it'll stick unless they're willing to keep it up over the long haul...It's kind of a false trade in some ways," he said. "They agree not to spend their own money suing you on behalf of copyright owners, and you end up giving up your privacy. You end up confessing your sins, but it leaves all the actual recording companies... and all these people to come after you anyway if they want to, and sue you."

Amnesty irrational: Meanwhile, as expected, the RIAA unveiled its much discussed amnesty program, which will apply only to alleged infringers who have not yet been sued by the trade group and are foolhardy enough to use it. "For those who want to wipe the slate clean and to avoid a potential lawsuit, this is the way to go," RIAA chairman/CEO Mitch Bainwol said. "We want to send a strong message that the illegal distribution of copyrighted works has consequences, but if individuals are willing to step forward on their own, we want to go the extra step and extend them this option." Bainwol failed to note that the "extra step" to which he refers WILL NOT PROTECT YOU from other potential litigants.

One final note: If the RIAA's lawsuit orgy does inspire a mass exodus of KaZaA users, you can be sure that at least some of them will turn to anonymous, encrypted P2P networks for their music. And among those networks are a few that won't cave so easily to the RIAA's heavy-handed methods. Take Earth Station 5, for example. If its stealth technology doesn't prevent copyright owners from subpoenaing its users, dealing with a venture headquartered in Palestine might.

Q  U  O  T  E  D

"Out of all people, why did they pick me?"
-- Brianna LaHara, a 12-year-old New York City girl sued by the RIAA for file-sharing, asks the same question the RIAA must be asking itself right now.

Can we please take this thing to trial and get it over with? For those of you keeping score at home (and I can't imagine many of you are), SCO took another swipe at the open source community this morning. In an open letter posted to SCO's Web site, SCO CEO Darl McBride accused open-source advocates of engineering the recent denial-of-service attacks that enfeebled SCO's Web site. Such vigilantism, he said, raises questions about the open-source movement. "We cannot have a situation in which companies fear they may be next to suffer computer attacks if they take a business or legal position that angers the open-source community," McBride wrote. "Until these illegal attacks are brought under control, enterprise customers and mainstream society will become increasingly alienated from anyone associated with this type of behavior." Harsh words to be sure, and ones that didn't end there. McBride went on to criticize the ideas at the very heart of the open-source movement, saying free software is a lousy business model. "It is clear that the open-source community needs a business model that is sustainable, if it is to grow beyond a part-time avocation into an enterprise-trusted development model... In the long term, the financial stability of software vendors and the legality of their software products are more important to enterprise customers than free software. Rather than fight for the right to free software, it's far more valuable to design a new business model that enhances the stability and trustworthiness of the open-source community in the eyes of enterprise customers. A sustainable business model for software development can be built only on an intellectual property foundation."

Valley's newest trend: voluntary offshoring: Here's an interesting follow-up to my recent mention of the effects offshoring is having on the technology industry in the States. As companies move more and more jobs offshore, expatriate programmers and design engineers who came to the states for work are returning home. "It's historic; it's never happened before," New Path Ventures co-founder Vinod Dham told EE Times. "I expected software design engineers to be returning to India, but not chip designers. It is the uncertainty in the U.S. job market and the growth happening in India that's making it happen."

"Bill will continue to be an inspiration to all innovators." (Just hopefully not the ones at Microsoft) Sun cofounder and chief scientist Bill Joy, often roasted here a few years back for his dystopian vision of the future, is leaving the company. Sun, which didn't say why Joy is leaving or what his plans for the future are, is sure to mourn his departure for years. During his 20 years at the company, Joy helped develop a number of Sun's trademark technologies. "Bill will continue to be an inspiration to all innovators," Sun CEO Scott McNealy said. "Bill's many contributions, including those to Java technology, SPARCĀ® and Solaris Operating System, have helped define Sun as one of the most innovative and inspired places on the planet. We thank Bill for the strong legacy of innovation that he leaves in the hearts and souls of every Sun employee. He leaves behind an incredibly strong team of innovators."

After the deafening silence issuing forth from Cupertino last week, it was nice to see Apple finally comment on George Hotelling's attempt to resell a song he purchased from the company's iTunes Music Store (see "Time to re-write that DRM policy, Apple"). "Apple's position is that it is impractical, though perhaps within someone's rights, to sell music purchased online," Peter Lowe, Apple's director of marketing for applications and services, told News.com. "Economically, I don't believe there is going to be much of a market for resold music... We just don't see it as that much of an issue."

Call for entries: The Great Recording Industry Business Model Contest: The recording industry needs your help. It can't seem to figure out a business model that takes advantage of the way the Internet has changed the economics of music distribution. Perhaps you can. Beginning today, I'll be accepting submissions for "The Great Recording Industry Business Model Contest." I'll post the best in GMSV as I receive them and I'll reward the author of the winning entry with the appropriate plaudits and a SiliconValley.com t-shirt in CEO-prison-scrub orange. Have at it.

Off topic: Arnold's latest campaign strategy ... and a few more. (Thanks Craig)

Send recording industry business models to Jpaczkowski@knightridder.com


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