Friday, February 9, 2007

The Apple of RIAA's Eye

You know you have a lawyer in the family when dinner table discussion often involves digital rights and illegal downloading. Actually, I can't only blame the lawyer (me) in this instance. My husband is a photographer and his profession involves licensing intellectual property rights in his photographs. My son is interested in pursuing a career in a creative field. We have many friends who are artists, writers,musicians and in the film industry. Also, the three of us (me, hubby and teenage son) are avid music fans.

I also worked at a startup that was in the internet radio/streaming music business. We had a direct interest in the RIAA's policies on digital rights and licensing. In 1999 and 2000, my business development team worked out licensing arrangements with several major and independent labels at prices that didn't make a whole lot of sense at the time. Hey, it was 1999 and startups were paying crazy prices for everything just to be the first one to make a deal. The labels liked our model because we didn't offer downloads and we were willing to pay them to play their artists on our internet radio stations. In the traditional radio world, it was often the other way around.

I noted with interest the recent exchange between Apple, EMI and the RIAA regarding digital rights management (DRM). EMI is contemplating a model where music is distributed without DRM and would, therefore, allow the digital music files to be freely transferred. EMI's first offer to online music retailers was an upfront, multi-million dollar "risk-insurance" payment that would not apply against future sales. This proposal didn't fly with the retailers. According to the Wall Street Journal, EMI has requested that the online retailers submit a proposal that indicates the size of advance they would be willing to pay. EMI received the proposals on February 8th. So far, no announcements have been made, but Yahoo Music's General Manager, Dave Goldberg, predicts that by Christmas most of Yahoo's catalog will be DRM free.

Apple's Steve Jobs jumped into the fray on February 6th (two days before the EMI proposal was due) with an essay on DRM entitled "Thoughts on Music". He states that CD's do not have DRM software, so the music industry currently sells 97% of music without DRM. What's all of this fuss about a measly 3% of the market? Isn't it an artifice to require Apple to use DRM when 97% of music sales are not protected? Can't we just all get along in an DRM-free world?

Nice try, Steve. Everyone knows (or assumes) that Apple is seeking complete and utter control over the remaining 97% of the market. And, while digital music sales are increasing, they aren't making up for lost CD sales, which fell by 23% between 2000 and 2006. Total music sales for 2006 fell by 3%.

The RIAA quickly reiterated its position on the necessity of DRM, and shot an arrow at Steve Jobs and Apple. The RIAA suggested that if the constraints of DRM are slowing the growth of digital downloads because files can't be transferred freely between devices, then Apple should remove the portion of their DRM that restricts songs purchased from Apple to playback on the iPod only. Wouldn't that solve the problem? Touché, Apple.

I'm not a big fan of the RIAA and their "sue first, and think outside the box later" strategy. I'm also not a big fan of the argument that record labels deserve it because they are big companies and they've been ripping off artists for years. If they deserve it, then why doesn't everyone loot their local Walmart? It's an extreme example, but one that highlights the fact that Intellectual Property is, just that, property. The number of files that have been traded online is equivalent to looting.

Back to the dinner table discussion. I think my son understands the consequences of illegal downloading. Not the punitive consequences that "you could get sued or go to jail", but the fact that people he knows, like his father and our friends, make a living from Intellectual Property by licensing the right to reproduce their creations. Copying other peoples work and not paying for it may be convenient, but it is still stealing.

A legal, convenient and inexpensive approach is needed. The RIAA's DRM solution is inconvenient. Apple's $0.99/track approach is too expensive. Actually, the solution that makes the most sense to me is the Electronic Frontier Foundation's proposal on a collective licensing arrangement. The artists and labels get paid and consumers get the convenience of file sharing at a reasonable cost.

Unfortunately, don't expect the RIAA or Apple to agree to this approach any time soon. They have too much invested in the current system. There are other alternatives, such as emusic, that are making headway with DRM-free downloads from independent music labels. Personally, I subscribe to two streaming music services, Yahoo Music Unlimited and Rhapsody from Real Networks. Because I don't have a long commute to work, I listen to music at home. With these services and my Kima KS-110 (shameless plug), I'm happy as can be. I have access to millions of songs, without advertising, and I don't have to worry about DRM or my hard drive crashing and losing 1000's of downloaded music files. I listen to more new music now than ever. However, most Americans listen to music primarily in their car where streaming music is just starting to be available. So, for now, a solution to the DRM-wars is still needed and don't expect it from the RIAA or Apple any time soon.

Friday, February 2, 2007

Fear and Loathing in Boston


The saga continues on the Turner Broadcasting/Cartoon Network guerrilla marketing campaign. In textbook PR fashion, Turner Broadcasting quickly apologized and offered full restitution to the city of Boston. Turner also took out full page ads in Boston newspapers apologizing. From what I can tell, the media is treating them kindly for their efforts.

On the other hand, Sean Stevens and Peter Berdovsky, who were charged with placing a hoax device that causes panic, told reporters they would answer questions only about hair in the '70's. The media did not understand why the two would not answer their questions and used terms like "odd rant" and "nonsensical discussion" to describe what happened.

The charge of "placing a hoax device that causes panic", which carries a maximum penalty of five years in jail, requires the prosecutor to prove that the two men had a reasonable expectation that the devices would cause a panic when placed. The judge at the arraignment seemed skeptical that their intent was anything other than advertising.

The media was bewildered by their statements, but I say brilliant. No perp walk for these guys. If they dodged questions and left the building with hoods over their heads, they would look like criminals in the best case and terrorists in the worst case. They faced the press and, according to their defense attorney, performed. They are graffiti/performance artists who by their very nature have chosen an anti-establishment lifestyle. The press conference showed that 1) they were performers, not terrorists causing panic, and 2) only the establishment feared their actions.

After the press conference, young Bostonians couldn't wait to condemn the actions of the police. One young person called the police reaction "silly and insane" and said that Boston was "the laughing stock" of the country.

Those young and in the know are laughing at the older generation. Sounds a bit like the '60s, doesn't it?

From a PR perspective, the big loser is Interference Inc., the guerrilla marketing agency who couldn't be reached for comment. According to reports, their offices are closed and the CEO can't be located. Also, CNN reported that an employee from the company called one of the graffitti artists right after the panic started and told him to keep quiet. A textbook example of what not to do in a PR crisis. Any guesses on whether their offices will ever reopen?

Thursday, February 1, 2007

Fearing the Flu & Cartoon Bombs

It was an interesting day in the news.

Fearing the Flu. The Centers for Disease Control and Prevention are set to release 108 pages of guidelines for states to follow in the event of a flu pandemic. Though no one from the Centers are officially talking about the document before it's released, several commentators have said that it calls for a staged response to a flu pandemic. All stages include some type of voluntary quarantine of the families members of people who are infected.

When I heard the report this morning, I started down that long, dark tunnel of analysis that my husband claims all lawyers enter when confronted with a legal question. What kind of legal issues would a flu pandemic present for my business clients?

Here are some issues that I thought of -

When can employees return to work after a voluntary quarantine?
What if an employee who is under a voluntary quarantine comes to work?
Is an employee under a voluntary quarantine on vacation, sick or unpaid leave?
What if the school of an employee's child is closed and the employee can't attend work?
What if some employees can work from home and other's cannot?
If a supplier defaults on a contract, is a flu pandemic a force majeure (act of God)?

I'm sure there are many more. If you think of any, post a comment.

Cartoon Bombs. In what will go down as the biggest snafu in guerrilla marketing history, the Cartoon Network placed "guerrilla graffiti light installations" in public locations in Boston. Police responded by shutting down Interstate 93 and several other roads, closing two bridges between Boston and Cambridge and halting boat traffic on the Charles River. At least one of the installations was detonated by the bomb squad.

The devices were placed in the public locations by Interference, Inc. a guerrilla marketing agency who describes itself as a "nationwide guerrilla and alternative marketing agency from idiation through tactile implementation and staffing."

Turner Broadcasting's PR machine quickly issued a statement apologizing and that they notified officials of all locations of the devices as soon as they were aware that there was a problem. Interference, Inc., a much smaller company, did not comment. Its website is not operational and the CEO, Sam Ewen, could not be located.

Back in 2001, Sam Ewen was interviewed by atnewyork.com. In response to a question on the effectiveness of guerrilla marketing, he said:

"There are quite a few ways to tell if a campaign is working or not. If there is a promotion involved, you can use a promotion code, a unique URL or a special 800 number to track actual responses. Or, you can look at actual sales during the time of the campaign. If it's more like a brand building campaign, you look at general traffic at a site or store. The neat thing about guerrilla marketing is that the media can buy into it and the campaign becomes the story."

Well, this campaign certainly became a story and the media coverage was huge. Something tells me that the result will not be a large number of Bostonians tuning in to Aqua Teen Hunger Force on Cartoon Network. More likely, they'll be tuning into Court TV to see the results. According to Boston Mayor Thomas Menino, the city is prepared to take civil or criminal action against those responsible. "This is a heavy penalty, imprisonment, two to five years for each one of them," he said. "When it comes to public safety, we are throwing everything at them."

Next time Cartoon Network and Interference Inc. are "idiating" a guerrilla marketing campaign, they might want to check in with their lawyers first.