This morning, I saw a slashdot article, this one, where an indie game developer mentions the free-rider problem in regards to DRM. The problem is, there is a significant misunderstanding of the free-rider problem and how DRM deals with it(hint, it doesn’t).

The free-rider problem is an issue in economics and game theory, where someone is able to get a free-ride off of the effort of others. One example is where you have two trappers. Now, if both trappers work hard on their own traps, they’ll each come out ahead at about three resources each. However, if one trapper decides to poach the other trapper’s lines, then that trapper gets six resources. If they both poach, neither gets anything. Typical self-interest says that it is better to poach than to trap, as there is a possibility of getting more resources, for less effort. However, in terms of the collective interests of both trappers, its better if neither poaches. Because there is a very real risk that if both trappers poach, then neither gets anything, and this is an extremely negative outcome. Usually, people spend the effort, or the cost to get the benefits because of the risks associated with free-riding(like jail-time for theft and fraud).

So in terms of piracy, if everyone free-rides, then everyone loses in the end. This is fairly understandable to all pirates, regardless of reason. However, free-riders exist in any system where there will be a possibility of free-riding. Theft will always exist. Fraud will always exist. The incentives and motivations are too great. The question is, how much do the free-riders cost you, and if everyone that pirates really is a free-rider?

One of the central fallacies used by DRM proponents is that every act of piracy, is a lost sale. This is, frankly, wrong. Its a very complex situation, but it can be broken down. Lets consider a customer and an artist. The artist produces a work that is either good or bad. The artist only profits when someone buys a work. A customer, however, may have money, or may not have money now(student for example). So if a customer has money, and they choose to buy, there is basically two outcomes: where the work is good, and both benefit, or where the work is bad, and only the artist benefits. It can be hard to determine if something is worth buying these days with such varied tastes, and such varied levels of quality. Now, imagine if the customer with money pirates instead. There are three outcomes here. One where if the work is good, the customer will buy it or something else from the artist, and thus, both profit. If the work is bad, the customer will not buy anything, and thus saves their money. And finally, the customer doesn’t care, and doesn’t buy anything from the artist either way. This is where a lost sale happens. Not when the customer pirates, but when it doesn’t matter what the quality of the work is, they will still pirate the work.

There is also the alternate side, where a customer doesn’t have money now. This is what artists should be concerned about. Lets say the poor customer doesn’t pirate. They have no money, so they can’t do a lot of social activities, and so they basically end up bored. There are of course libraries and that, so we’ve changed the behavior of our customer to that of someone that contributes nothing negative or positive to the situation. However, if the poor customer pirates instead, there are four possible outcomes. The first is where the work is good, and the poor customer saves up/earns the money to buy from the artist. Both profit in that instance. Or, the poor customer spreads the word of mouth about the product, and gets others, with money, to buy it. This is potentially a situation where the artist can gather many new customers, because word of mouth is hard to quantify at exactly how much of a benefit the artist will gain. Then there is the instance where the poor customer discovers the product is bad. The poor customer profits, in that they don’t waste theirs or others money on a product not worth the money. And finally, the instance where it doesn’t matter, the poor customer will pirate anyways, and there will be no profit for the artist.

This can all be summed up by a simple picture:

Nash Equilibrium of Piracy

Basically, the artist fails to understand the motivations of the customer, namely that they don’t want to waste money on crappy works. So its to the customer’s benefit to pirate, even if they have the money, as the risks are minimized for them. For the artist, its to their benefit to produce something good, and worthy of the money. So unfortunately, what DRM does is it messes up this equilibrium, where customers end up spending money on products they want to buy, and the artists have a good incentive to produce good works. DRM forces customers to waste money, and the artist has spent a significant amount of money doing this. The costs outweigh the benefits, which to be frank, were dubious in the first place. The artist spends money and effort on a DRM system which is easily circumvented, as long as someone finds it worthwhile to do so.

This is done for a variety of reasons, ranging from the invasiveness of the DRM, to just the technical challenge of doing so. There is also a possibility that the DRM makes the product worse, and the pirates wish to work around this. By placing DRM in the way, the artist creates an incentive to break it. So either the DRM doesn’t get in the way, and works perfectly, or don’t use DRM.

Essentially, the way to deal with piracy isn’t DRM, but in making good stuff. If you make good stuff, and don’t place technical barriers in the way, you create a strong incentive for customers to pay for your work. Even better, instead of letting people evaluate the works via piracy, provide representative samples, that are constantly changed, 100% free, and good quality. An example would be providing two songs from an album, along with short samples of the other songs. This helps the customer see that it is worth the money on the album, especially if buying each song individually is more than buying the album. Or, just sell the songs individually.

This is yet another post in my Bill C-61 series.

Previous entries:

• New copyright ideas
• The conservative view on Bill C-61
• Fair use provisions (Personally, its not my best writing. I may go back, and edit it a bit one day. If I do so, I’ll archive the previous version of the page somewhere else.)
• Futility of technological locks

So, faced with the impending problems of the bill, what can be done? I am by no means an expert in legal matters, nor am I a hippy that wants everything for free. (Anyone that accuses me of that will be summarily ignored. Its a blatant straw man, and I do not debate strawmen.) As a disclaimer, here are my interests: I believe in freedom, and rights for the consumer. I believe that consumers should come before companies, each and every single time. And yet, I plan to run a successful business upon graduation, that will be dealing largely with artists, and with producing content that will be consumed.

My beliefs and interest are as both a proponent of freedom and rights and as a soon content creator and copyright holder. I can see, and understand both sides of the issue, both sides of the debate, and this is frankly, the toughest divide that has been faced by law.

How exactly do you ensure the content creators are fairly compensated for their work, while still allowing consumers the freedoms and rights they need for innovation and progress to occur? That is our question. How do we do this, in a way that is not susceptible to lobbyist manipulation, to shady legal tactics, that does not unfairly impact the income of content creators?

The first issue I can see is that content creators do not want to sue their fans. As an artist, would you want to sue the people that take pictures of your work? Would you, as a software programmer, want to sue someone that found your work genuinely useful? And would you as a consumer, want to be sued for enjoying and promoting someone’s work?

However, they do in fact want to, and should, sue those that commercially benefit from spreading their work. If a person or entity spreads someone’s work for the express purpose of profiting from it, without permission or license from the content creator, then they should be on the hook for each copy that they sold. If it can be shown that such a punishment would not deter, or has not deterred them in the past, then the courts can apply higher fines and punishments. Assumed in all of this is a legal injunction to stop producing and spreading bootleg work. Those that knowingly import and sell bootleg copies of works would also be subject to this provision.

What about people that have no commercial intent, but the scale of their actions did or may have a negative affect on a content creator’s income, they should be given light fines, and again an injunction. Those fines go straight to a fund that encourages and supports Canadian artists and content creators. It must be noted however, that satire, criticism, education, or parody, should all be protected. They are an essential part of art, commentary, and of progress.

And finally, we must address fair use. Consumers should have the right to move media to any medium they want, even give songs to their friends and family. Such a scale does not harm the content creator, and has been shown to encourage it. If you hear a song on the radio, and like it, the odds are you will buy it in stores or download it. We live in an age where when you hear a song you like, you can within minutes have a licensed copy on your hard drive. If a friend has a cool song, and reccommends the album, you are more likely to buy it.

There are of course, those that would never buy any music, or movies, and will always download them. Those people constitute a small majority… and this is an important caveat, if you make it easy to buy and use the content legally. So long as its easy to buy, most people will buy instead of download. But that is beyond the scope of legislature.

Consumers should also have the right to appropriate clips(of a certain length that does not harm the profitability of the content creator’s work) and music for their own productions, so long as it is for non-commercial purposes, and they provide attribution.

There of course, is a bit of a difficult issue, however, in a global internet and global economy: works in other countries. I admit, that I do download episodes of animes shows. However, I only download what is not available for sale in Canada. If I only had some way of buying it, or giving money to the creators, despite the fact they operate in a different country, I would! And my situation is mirrored by several million other people, across the world. If only we had a way…

It would be incredibly revolutionary, and something almost universally support by the voters, (hint hint politicians), is if either a crown corporation that provides or legislation encouraging and subsidizing services that would enable users to pay money for copies they downloaded elsewhere, and the money goes straight to the content creators, minus banking fees and costs to run the company. This would support the companies whose work we enjoy, while giving citizens a pass on downloading content that is not available anywhere but on P2P sites.

This is yet another post in my Bill C-61 series. And a fair warning, this is an extremely long post. You have been forewarned.

Previous entries:

• New copyright ideas
• The conservative view on Bill C-61
• Fair use provisions (Personally, its not my best writing. I may go back, and edit it a bit one day. If I do so, I’ll archive the previous version of the page somewhere else.)

Bill C-61 does, admittedly, provide for a lot of protections and freedoms. Except where those freedoms conflict with a technological lock. So pretty much, even a half-assed protection scheme like CSS for DVDs, would prevent us from exercising our rights.

(See Bill C-61 Sidebar for a small discussion on a paradox I found in the Bill)

The problem however, is that the bill gives precedence for technological measures over basic usage rights, like backups, and rights protection. (See section 41.21(1) for its treatment above all of “Rights Management Information)

And this is quite frankly stupid. Technological locks can and will be broken, given enough of an incentive. Even the purportedly unbreakable encryption schemes of HD-DVD and Blu-ray were broken relatively quickly. I’ve even participated in such efforts, like working on code that circumvents the hash checks of the code blocks sent to my creative ZEN. Admittedly, I played a small role. But I was still able to do so, using no more than a computer, with a compiler, usb ports, and code.

Do we now outlaw compilers? USB ports? Code? The bad comes with the good. I can use the tools provided on a basic Linux distribution to write a computer virus, using no more than the ability of my mind. Does this mean the tool should be locked up? Or rather, should the actions of a few be punished and socially condemned?

What if they have a “supervisor” that prevents anyone from using a compiler to do so. Even a very well-programmed guardian can and will be fooled, as can be attested by anyone that has tried to block porn sites from teenagers. Any machine block can and will be defeated.

Anything that restricts us, that was made by a human being, can and will be defeated. Any puzzle, any scheme thought up by one man, can and will be broken by another. That is what intelligence and free-will means. We can imagine ourselves as the creator, and find the flaw, for there is always a flaw. Always.

All it takes is time, and effort. And if you prevent enough people from doing things easily, they have a reason to do so. Any technological restriction and will be defeated. There is no way to stop it. Ask any third year computer science student. Ask any mathematician that deals with encryption.

To make it a bit clearer, let us borrow an analogy from the real world. Imagine I place a lock on my house. Someone breaks that lock, and enters my house, stealing something. In this case, stealing is when I am deprived and they are simultaneously enriched. Now, do we punish them for breaking the lock by itself? No. We punish them for Breaking and Entering, as well as theft. The breaking itself is not illegal, but when done for the purposes of trespassing, then it is illegal. Even were the door open to all and sundry, that still does not allow for someone to trespass. So, the same punishment still applies, even if they did no breaking. The illegal act here is the entering, not the breaking.

Another example, then. Imagine a company produces beds. They also provide head rests. They design their beds such that they only connect to their head rests, and place a protection(hard plastic perhaps) on changing this. Now, say, I want to make my own head rest, or buy a different companies head rest. Breaking that plastic does not constitute an illegal act, especially not when it is commercially detrimental to the bed company. All that protection did was to try force me to buy their head rests.

Forcing one to buy other products, or forcing a person to pay over and over again for the same thing, from the same company is extremely illegal, when it comes to physical products. Imagine if I bought a car, and then they came out with an updated version. Then they stop all support of my car, and pester me to upgrade for better “features”. My car works perfectly well, great quality, yet, I am essentially forced to buy their “better” version, once again. This is whats happened in music, and the music companies love this. People bought records, then 8 track tapes, then casettes, then CDs, then ringtones and downloads… and it was all the same music.

Technological locks make us do this. If we can’t transfer our casettes over to CDs, then we have to buy the CDs! And if our computer dies, and we weren’t allowed to make backups… too bad so sad, buy it again!

I can almost picture these companies cackling as they slip their greasy fingers into my wallet, and try to extortion more money from me. Technological measures do not, I repeat, do not stop piracy. Their only purpose is to make us buy more.

So the question that must be asked is: why oh, oh why, is it that in Canada, the corporation’s bottom line matters more than the consumers wallet? Collectively, our wallets hold more money(and more taxable income) than the corporations individually do. But they’re more valuable to protect than we are Wow. Just wow. The government wants to allow corporations to make us poor. When you talk to your MP, mention these points, that the voting public, is infinitely more valuable, and more important than a psychopathic corporation. The public interests should come way ahead of any corporations interests. Make this very clear, and that any politician seen acceding to corporate interests over voter’s interests will not be voted for. Make it clear you will campaign against any such politician, that you will write, you will speak. You will donate your time, effort, convince your family, co-workers, friends and lovers to not vote for them.

You have power. You have influence. Use it.

Fair use is a simple concept. In Canada its known as Fair Dealing. The idea is that no matter what you bought, no company has the right to restrict your actions with the product. Essentially, it follows from the idea that you could buy a newspaper, and cut out clippings of a newspaper article, and give them to everyone. The clipping is what you want to show people. This is perfectly allowed by law, since you OWN that physical copy.

Of course, in the digital world, it gets a little bit upset by some basic characteristics of digital products. Characteristics of digital products:

• Copying is now a zero-cost activity. Or at the very least, neglible cost. Any digital product can be copied to any other medium, can be transferred between computers, stored on MP3 players, stored on phones, etc.
• Copying does not degrade the product. Every copy is zero-cost, and zero-decay. The copy of a song on my mp3 player is a perfect copy. The copy of a show on a dvd is a perfect copy.
• It has become easier than ever to make mashups of content. We can use our own pictures, or even clips from shows, along with music or dialogue to make our own content, derived usefully from copyright content. (See Lawrence Lessig’s talk at TED for some ideas how this works)

Even taking these into account, fair dealing provisions are still eminently necessary. Despite the above, there should be no reason for companies to deny us fair dealing for any reason. I would like to denote that fair dealing does not mean full sharing, but it means backups, and sharing clips and pieces of a work.

Fair dealing allows me to let my co-worker listen to the song I’m listening to. If he likes it, he’ll get it. Fair dealing allows me to back up my files and folders to disc or to an external hard drive, in case of disaster. In fact, disaster hit me once already, and I was very very lucky. Thanks to all the music I had on my mp3 player, I didn’t have to worry. Everything else had to be recovered from the dead hard drive.

The most important thing however, is that fair dealing protects me from depradations, by both the content companies, and by nature. It saves me having to rebuy my music when my computer dies. It saves me having to rebuy my music in the newest most updated form.

Of course, companies hate that. Why… thats lost money right there! Screw you. Thats all I have to say. Getting my money yet again for something I already bought? Thats not capitalism. Thats not offering me better services or products. Thats locking me in to your products. That is not fair.

Fair dealing exists to protect consumers. Yet Bill C-61 eliminates all mention of fair dealing. It is the content cartels most hated two words, because all they can see is the direct loss of money.

They are ignoring the overall benefit of fair dealing. For one, it protects consumers. This is a good thing. Not a bad thing. If a consumer has already paid for a product, they should do with it what they will. No company should be able to stop a consumer from using a bed they bought how they will. And it follows that the same applies to digital content as well.

Another is that it exposes new people, new audiences, to your products. They get to see the clips. They get to hear the music. Word of mouth has become the most important way of sharing information about products. And word of mouth is always improved by actual product viewing/use. I’m more likely to buy a game my friends like than what the hot girl on tv reccomends.

Introducing new people to your products is not a bad thing. But companies see it as bad, since no one paid them for the privilege. You can be perfectly successful using word of mouth. For example, Jonathon Coulton. He composed an addictively hilariously song called Code Monkey, and due to it, is actually making money from gigs. He composed the ending song for Portal, dontchaknow.

There are a few more important things that fair dealing protects: Parody, criticism, and satire. These are essential parts of a healthy artistic community. As well, parody and satire are a neccesary component of Canadian humour. Making those illegal will harm artists, critics, and even students of art everywhere. Plus, the comedians will be less funny. Do you want unfunny comedians?

More reason to want fair dealing: it allows criticism, parody, and satire of ridiculous content… like scientologists. Under Bill C-61, they could sue anyone that talked about their religion’s texts negatively for $20,000. Don’t believe me? They’ve done it in the states.

So really, if you want to be able to use your stuff how you want, without worrying if a company will sue you for Umpteen million dollars, talk to your MP about Bill C-61. Direct them to well, any site against it. Explain how it does not protect you the consumer, and how that is more important than lining the wallets of already rich companies.

There is a bit of a furor right now for the judge that ordered Google to hand over logging data, identifying usernames and ip addresses associated with video views.

I decided to take a look at the judge’s ruling, and there were some very interesting discoveries. Viacom asked for, in this order:

• The code that powers google.com to ensure that “defendants did not modify the search tool to more easily find infringing material.”
• The code that powers youtube.com, for the same reason
• As well they need the code to ensure that defendants did all that could be done to protect against infringement.
• The source code to the “Video ID” project, which compares incoming videos to “fingerprints” of videos provided by copyright holders. (Explanation a bit further on)
• Copies of all videos that were removed
• And finally, the IP Addresses and Usernames logging data associated with videos.

Take a look at that list. Viacom essentially fired a massive cannon at Google, asking for all their internal trade secrets, and as noted by the judge, they never promised they wouldn’t share those secrets. In addition, Viacom asked for the advertising database schema!

Pretty much, this ties in with what I said before about these broadcasts companies becoming scared of the many-to-many patterns we are seeing.

Viacom did whats called setting up the shot. They asked for extremely irrational things, low prices if you will, and if it had worked, they would have been extremely well off. Then, they sneak in a much less irrational request, one that Google’s lawyers fell for, which is what Viacom wanted all along. In comparison to the incredibly irrational requests, the logging data seemed eminently reasonable.

It was almost a win-win process, so long as Google fell for something or made a mistake. And they did.

Luckily the EFF are already reacting, citing the Video Privacy Act.

I sincerely Google provides the data in paper format.