Über die Autorin bzw. den Autor

William W. Fisher III is the Hale and Dorr Professor of Intellectual Property Law and Director of the Berkman Center for Internet and Society at Harvard Law School.

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PROMISES TO KEEP

Stanford University Press

Contents

Acknowledgments............................................................ixIntroduction...............................................................11 The Promise of the New Technology........................................112 The Baseline: Entertainment Law and Practice in 1990.....................383 What Went Awry...........................................................824 Taking Property Rights Seriously.........................................1345 Online Entertainment as a Regulated Industry.............................1736 An Alternative Compensation System.......................................199Appendix: Where Does the Money Go?.........................................259Notes......................................................................265Index......................................................................321

Chapter One

In June 2001, I gave my younger daughter a new laptop computer as a high-school graduation present. My hope was that she would use it primarily as a tool for research and writing in college. The model that I selected came equipped with many features that would help her work: a fast microprocessor and considerable "random access memory" (to speed her writing and calculations and to enable her to operate several software programs simultaneously); an Ethernet card (to enable her, through her college's high-speed network, to communicate via email and to do online research); a large hard drive (to enable her to store her notes, essays, and the fruits of her research); a DVD drive (to enable her to use the growing amounts of data and software that are commonly stored in that format); and a large, high-resolution color screen (to ease eye strain).

The computer has so far served her well in exactly the ways I'd hoped. But it has also, to my mild surprise, come to function as her media center. The hard drive now houses (along with Abnormal Psychology notes and email archives) over three hundred sound recordings, all downloaded from the Internet. The computer also functions as a mini-theatre. On weekend evenings, a group of her friends will borrow it for a few hours, drop a DVD into the drive, and huddle together on a couch to watch the show. Finally, she was recently given a "CD burner," which, when connected to the computer, enables her to copy audio recordings either from her hard drive or from compact discs borrowed from her sister or her friends onto inexpensive blank discs. In short, my daughter, like most of her classmates, routinely employs her computer, not just to read, write, communicate, and calculate, but also to gain access to and then enjoy music and movies.

Watching the ways in which my daughter and her friends use their computers to obtain entertainment, I've been struck by four aspects in which their experience differs from how, thirty years ago, my college classmates and I experienced entertainment. Most are differences in degree, not kind, but in the aggregate they foreshadow a fundamental shift in our culture.

First, my daughter and her friends experience entertainment as inexpensive. Recorded music, in particular, they experience as free-easily obtained from a variety of Websites and peer-to-peer copying services for no charge.

To be sure, their attitude on this score could be challenged on a couple of grounds. Most obviously, it could be objected that recorded music seems to them free only because they are stealing it instead of buying it. That objection rests upon some assumptions concerning the shape of copyright law and the associated legal rights of the creators of the music-assumptions that will be examined in detail in Chapters 2 and 3. For the time being, it is sufficient to observe that legal constraints have thus far made little dent on either the behavior or the attitudes of my daughter and her friends.

It also could be objected that recorded music is far from free, even to my daughter, when one takes into account all of the costs associated with gaining access to it. After all, her computer (now supplemented by the CD burner) cost a good deal of money, as does a subscription to an Internet service provider, which enables her to download the music. As it happens, my daughter does not bear any of those costs. She received the computer and burner as gifts, and the cost of her ISP access is buried somewhere in the list of fees that accompany her college tuition. But surely they should be taken into account when determining the price of providing her access to recorded music. This well-founded objection points toward a refinement of the characterization with which we began. The average cost to her of each sound recording-taking into account the costs of the computer and the connection to the Internet-is surely positive. But the marginal cost-the cost of obtaining each additional recording-is near zero.

This helps to explain the second of the four ways in which my daughter's engagement with entertainment differs from mine. For her, entertainment is plentiful. Her collection of sound recordings (modest by the standards of her classmates) dwarfs my college record collection. And she has easy, casual access to a menu of movies for which there was no parallel in my experience.

This surfeit of material, in turn, partly explains the third feature: the culture of sharing. To be sure, my classmates and I sometimes shared music. We would occasionally loan our record albums-to selected friends whom we expected would take care of them and return them. And a few of my classmates had tape recorders that enabled them, at a relatively modest cost, to make and give away imperfect copies of albums. But these exchanges are trivial compared to the promiscuous sharing of the current generation.

Finally, my daughter and her friends expect that entertainment of all forms should be available anywhere anytime. The mobility of entertainment technology is of course not an altogether new phenomenon. Portable and car radios have been around since before I was in college. Portable cassette players and CD players are well-established features of the cultural landscape. But until recently, these were experienced as exceptions to a pattern of sharp constraints on space and time. Movies were best seen in theatres, which operated on rigid schedules. Television programs were best watched at home, and (before the advent of the VCR) could only be watched at predetermined times. Music was best heard through a stereo system, which was inconvenient to move around. These distribution channels-and the expectations they engendered-have not disappeared. But the ubiquity of devices that provide users more control over when and where they listen and watch have shifted the locus of normality. Now, temporal or spatial constraints on the availability of recorded or interactive entertainment are seen as exceptions, in need of explanation or justification, not the rule. (Years ago, my daughter, watching broadcast television at home, rose to go to the bathroom. As she left the room, she called back, "Please pause the movie.")

In several ways, in short, the manner in which my daughter engages with recorded entertainment is different from the manner in which I did. Is it better? Yes. Not because she listens to more music or watches more movies, nor because the average quality of her fare is higher than that of mine. The improvement, rather, lies in the diversity of the menu of material available to her, her ability to select the time and place with which she consumes it, and, most subtly, the communal, cooperative way in which she and her friends collect and enjoy audio and video recordings.

Is this revolution now complete? On the contrary, one of the central claims of this book is that we have only begun to tap the extraordinary power of the new technology. But the way in which my daughter and her friends are already using their machines suggests the direction in which we could move. The balance of this chapter tries to chart that course.

The Technology

The precondition for the entertainment revolution was the widespread use of digital technology. Until the mid-1980s, the dominant ways of storing and transmitting popular entertainment all relied upon "analog" technology, in which information is stored or represented in the form of some continuously variable quantity: the shape of a record groove, voltage, the position of magnetic particles on a tape, and so on. One after another, each analog system has been or is being replaced with digital means of representing information-in which complex messages (such as the sounds emitted by an orchestra or the pattern of colors in an image) are represented by combinations of electronic pulses and the spaces left between them.

The principal examples of this transformation are undoubtedly familiar to most readers. During the late 1980s and early 1990s, most "record" stores in the United States replaced their analog long-playing vinyl record albums with digital compact discs. Correspondingly, sales of turntables and cassette players plummeted, while sales of CD players skyrocketed. During the 1990s, sales of digital audio recording devices-digital audiotape (DAT) recorders, "minidisc" recorders, and, most important, CD burners-rose, at first slowly, then very rapidly. At the turn of the century, sales of analog videocassette recorders (VCRs) began to decline, displaced by digital versatile disc (DVD, formerly digital videodisc) players (for playing prerecorded movies) and digital personal video recorders (PVRs) (for recording broadcast signals). In 2002, sales and rentals of movies in DVD format for the first time exceeded sales and rentals in analog VHS format. Finally, radio and television stations are just now beginning to make the transition from analog over-the-air signals to digital signals, and studios are beginning to produce movies in digital format (rather than on 35mm film), forcing theatres to install digital projectors.

In terms of the quality of the sounds and images they produce, not all of the digital systems are dramatically better than their predecessors. (Some audiophiles continue to insist that a good turntable, using an excellent cartridge to play an unblemished vinyl album, sounds better-"warmer," "fuller," "less brittle"-than a CD player playing a compact disc.) The digital systems do, however, have at least two characteristics that have proven crucial to the entertainment revolution. First, copies of digital recordings are identical to the originals, whereas copies of analog recordings are inferior to the originals. This means that digital recordings can be copied an unlimited number of times without degrading, whereas analog recordings cannot. Stephen Kramarsky provides the following illustration:

[I]f I have a photograph of a sunrise that I want to send to you, I might photocopy it and mail you the copy. The photocopy would be less clear than the original photograph, and if you decided to send a copy to your friend, your photocopy would be even less clear and so on until, twenty friends down the line, even the best color copiers would have reduced the image to a red and orange blur. This is because photocopying is an analog process. If, on the other hand, I had a digital copy of the sunrise image saved on my computer, I could email it to you, and you could email it to whomever you liked and so on down the line. The twentieth copy of the file would be identical to mine, and so would the twenty thousandth.

Second, as this illustration suggests, digital recordings, unlike analog recordings, can be stored on and manipulated by general-purpose computers. One of the most important implications of that capacity is that they can be compressed. The digital media in which sound and video are most commonly stored contain unwieldy amounts of data. A typical compact disc contains over six hundred megabytes, while a typical movie stored on a DVD contains five gigabytes. During the 1980s and 1990s, compression standards were developed and popularized that made it possible to reduce those numbers dramatically-not by removing bits of information at random but, more cleverly, by identifying and removing bits that do not contribute significantly to the quality of the sound or image that a recording, when replayed, generates.

Currently, the most popular audio compression standard is the Moving Picture Experts Group's MPEG-1 audio layer 3 algorithm, popularly known as "MP3." Using freely available software, one can use the MP3 format to reduce the digital recording of a song on a CD by a ratio of up to twelve to one. To most ears, the compressed recording sounds virtually identical. The most popular family of video compression formats, known as DivX, enables one to shrink a recording of a movie by a factor of somewhere between seven and ten. Again, the compressed version is hard to tell from the original.

Compression technologies continue to improve in ways that will affect the argument of this book. Already, audio compression systems substantially better than MP3 are available. For example, MP4 (short for MPEG-4 AAC) contains audio "codecs" (compression-decompression systems) that are substantially more efficient, scalable, and modular than MP3. Even more radical improvements are on the horizon. A compression system currently under development at the MIT Media Lab uses metadata to describe the content of music-in much the same way that modern graphics programs communicate with modern laser printers-to achieve extraordinary levels of compression with minimal loss of quality. Several companies are currently working hard to develop better video codecs. Meanwhile, consumers are being offered ever larger and ever cheaper hard drives suitable for use in home computers. The net result: with relative ease and at modest cost, consumers can already create large libraries of recorded entertainment, and soon they will be able to maintain enormous ones.

The many advantages of these new technologies have fueled demand for the machines that embody them. The speed with which Americans have been buying the new devices is extraordinary. Currently, 54.4 percent of American households own stand-alone DVD players; 54.3 percent own computers with CD players; 28.1 percent own computers with CD burners; and 23.3 percent own computers with DVD players. Most of these numbers have increased sharply since 2002.

The foregoing innovations, dramatic as they are, would have had only modest impact on the music and film industries if it were not for the creation and popularization of the Internet. A few statistics suggest the speed and importance of the emergence of this new communications system: in 2000, roughly 43.5 million households in the United States (41 percent of all households) had access to the Internet. In 2001, the numbers were 53.4 million (50 percent); in 2002, 58.2 million (54 percent). They are projected to rise to 65.0 million (59 percent) by the time this book appears. The foregoing numbers actually understate rates of Internet usage, because many Americans who do not have access to the system at home do so at school, at work, or in libraries.

As one might expect, Internet usage is roughly correlated (inversely) with age, but not as much as one might think. As Figure 1.1 (prepared by the Department of Commerce) shows, teenagers use the system the most, but Americans between the ages of twenty and fifty also log on in large numbers-and that pattern has held true for the past several years.

Internet usage is also correlated (positively) with income, but again not as much as one might expect: over 25 percent of Americans living in households earning less than $15,000 per year use it. Finally, since 2000, Internet usage rates have ceased to vary with gender; women now use the system just as often as do men.

In most other countries, Internet "penetration" is lower than in the United States, but is increasing fast. The total number of people worldwide who had access to the Internet was 388 million in 2000, 493 million in 2001, and 591 million in 2002. Although the annual growth rates in North America and Europe have slowed to 8.5 percent and 15.6 percent, respectively, the rates in other parts of the world remain extraordinarily high: 22 percent in Africa; 34 percent in Asia; and 36 percent in Latin America and the Caribbean. Already, the total number of Internet users in Asia exceeds the total number in North America, which, in turn, slightly exceeds the total number in Europe.

The Internet has many uses, of course, but the most important for present purposes is that it enables people to transmit-easily, quickly, and inexpensively-digital audio and video recordings. Somewhat more specifically, it makes possible three different ways of delivering and enjoying recordings, which for the purposes of this book we will define as follows:

Downloading: The transmission over the Internet of a digital copy of an audio or video recording, followed by storage of that file on the recipient's computer, enabling the material to be replayed repeatedly on demand.

Interactive Streaming: At the request of the recipient, the transmission over the Internet of a digital copy of an audio or video recording, which is then "played" but not stored.

Noninteractive Streaming: The same process not at the request of the recipient.

(Continues...)

Excerpted from PROMISES TO KEEPby William W. Fisher III Copyright © 2004 by William W. Fisher III. Excerpted by permission.
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