July 2, 2006

Hollywood fighting back

Producers hope $2.75 movie prices counter China counterfeiters

The Associated Press

SHANGHAI, CHINA — In its battle against near-universal Chinese piracy of Hollywood blockbusters, Warner Bros.' weapon of choice is a little white price tag smaller than a postage stamp.

Last year, the home entertainment giant began selling selected movies with price tags of only $2.75 in major Chinese cities, aiming to carve out a market for relatively affordable but high-quality, legitimate versions of movies in a sea of counterfeit products selling for less than a dollar.

"The reason why piracy's come along is that there weren't enough products at the right price soon enough," said Tony Vaughan, managing director of CAV Warner Home Entertainment Co., Warner Bros.' joint venture distribution company in China.

Warner's strategy has been "to build a legitimate, viable offering for the Chinese consumer," he said.

The war against rampant counterfeit movies, drugs and other products is moving from China's back alleys and sidewalks into boardrooms and laboratories. Companies that once relied on lawsuits and police raids are diversifying their strategies, turning to competitive pricing and trying out new technologies to even up seemingly overwhelming odds.

Drug-maker Pfizer Inc. of New London, Conn., is experimenting with attaching small, radio-frequency identification chips to track packages of its erectile disfunction drug Viagra, popular knockoffs of which are widely available. The RFID tags, attached to packaging, can be scanned by a pharmacist to detect product codes showing their authenticity, and presumably weeding out fakes.

Confronted with widespread piracy of computer software, Microsoft Corp. is using new products and advertising to promote the benefits of legitimate software. The new Windows Genuine Advantage program checks the authenticity of a user's software and provides access to Microsoft software and other benefits for Windows XP users. The company is also offering low-cost versions of Windows starter software in some countries.

"Do you really want an 'adventure?'" says a Microsoft banner greeting arriving passengers at Shanghai's Hongqiao Airport.

Lian Hoon Lim, a consultant at AT Kearney in Hong Kong, recommends a "portfolio approach" to clients: A combination of secrecy, careful research of local partners, new technology and business strategies, as well legally enforcing patents and trademark rights.

"It's not a problem for which there is a clear silver bullet," Lian said. "The message is that people who want to do business in China have to expect to spend money to protect themselves."

Worldwide, sales of counterfeit products may run as high as $650 billion a year, the International Chamber of Commerce in Geneva estimates. The global black market for counterfeit pharmaceuticals is worth up to $32 billion.

In many industries, China accounts for the largest share of pirated products. International criminal syndicates are devoting increasing technical prowess to foil anti-counterfeiting packaging and extend their distribution into major Western markets, said Lee Bromberg, head of the patent litigation department at the Boston-based law firm Bromberg & Sunstein.

July 3 2006

Yahoo! China faces new copyright law

Marshall Kirkpatrick

The International Federation for the Phonographic Industry, an organization with an antiquated name at the very least, has announced that it will file suit against Yahoo! China for copyright infringement under a new law that came into effect in China this weekend. The Federation says that around 90% of all music sold in China is pirated and Yahoo! China includes links to unaffiliated sites selling pirated music. The whole thing leaves a terrible taste in my mouth.

When Yahoo! handed over information on a number of dissidents and reporters to the Chinese government, it said it was just following local laws. Those individuals faced serious consequences. If international pressure is able to change Chinese law, those are the laws that should have been changed - not laws seeking to enforce a false scarcity over an ephemeral product like digital music.

When Google lost its appeal in a French court last week and was ruled guilty for including search results for counterfeit Louis Vuitton hand bags, most international observers thought it indicated an unrealistic and anti-American sentiment in France. For some reason intellectual property infringement in music is taken far more seriously. I hope people will think about the international politics at issue in the Yahoo! China case as well.

Specifically, it indicates a serious misplacement of priorities by US influence wielders. Trying to change 90% of any practice seems like tilting at windmills to me, so I have a hard time believing that pressuring China to stop persecuting electronic dissidents isn’t happening because it’s unrealistic. I think we all know why there aren’t serious resources invested in such a campaign - but I don’t know how much profit there was to be made in challenging apartheid South Africa, either.

Estimating damages from such practices in the developing world seems unrealistic, as it’s hard to imagine that most pirated goods would be bought at full market value if pirated alternatives were unavailable. Having read about highly militarized raids on the producers of pirated movies in the developing world, tying this case into larger questions of IP law like drug patents (lobbyists tie them together) and thinking about that number - 90% - really makes me think that some other business model other than scarcity has got to emerge around fluid commodities like digital music. For a good read on these topics, I recommend Information Feudalism: Who Owns the Knowledge Economy.

Of all the laws to change in China, what a shame this is the one that international influence worked its power on. What will Yahoo! Music do? They weren’t willing to challenge Chinese law on human rights, will they do so when it comes to search results and listings? If it makes sense for Yahoo! to change their practices in China, does it make sense for Google to change its practices in France? What does this mean for search?

Free 'Weird Al' Yankovic!

Pop-music parodist "Weird Al" Yankovic's latest song is "You're Pitiful," a take on James Blunt's "You're Beautiful."

June 13, 2006 · "Weird Al" Yankovic, the king of pop parody, has a brand-new song out, available for free on his Web site. Music Producer and Song of the Day Editor Stephen Thompson gives us the scoop:

In a career spanning more than 25 years, pop-music parodist "Weird Al" Yankovic hasn't exactly ranked among the music business' fiercest iconoclasts: He doesn't release his song parodies without the consent of the artists being parodied, and he's rarely used the Internet as more than a tool to promote his projects and connect with his fans. But a music label's efforts to block a (relatively tame) parody of James Blunt's ubiquitous hit "You're Beautiful" has Yankovic fighting back publicly, and using his Web site as a tool to do so.

According to Yankovic, Blunt himself gave his blessing to a song called "You're Pitiful" (audio), which was to appear on Yankovic's now-finished but as-yet-unreleased new album. But after Yankovic finished recording the parody, Atlantic Records, Blunt's label, told Yankovic that he couldn't release "You're Pitiful." Though Yankovic has encountered resistance from artists before -- after a miscommunication involving permissions, Coolio publicly objected to a released parody of "Gangsta's Paradise," while Prince has always turned down Yankovic's requests to parody his hits -- he says this is the first time a label has stepped in to squash the release of one of his parodies. (Quoth an Atlantic representative: "We have no comment on this matter.")

So how, exactly, does a music label have a say in whether one of its artists can be parodied?

"The legality in this case is somewhat moot," Yankovic writes when contacted via e-mail. "James Blunt could still let me put it on my album if he really wanted to, but he obviously doesn't want to alienate his own record company... and my label could release the parody without Atlantic's blessing, but they don't really want to go to war with another label over this. So really, it's more of a political matter than a legal matter."

Of course, it's not hard to circulate a song these days, and Yankovic has helped that process along by making an MP3 of the track available for free download on his Web site. It may not appear on Yankovic's new album, but "You're Pitiful" will still swirl around in cyberspace long after Blunt's original recedes from memory.

"I have a long-standing history of respecting artists' wishes," Yankovic writes. "So if James Blunt himself were objecting, I wouldn't even offer my parody for free on my Web site. But since it's a bunch of suits -- who are actually going against their own artist's wishes -- I have absolutely no problem with it."

UK lawsuit proceeds against Russian MP3 site
Mon Jul 3, 2006 10:45 AM ET

LONDON (Reuters) - The British music industry's trade group has been cleared to sue the controversial Russian music download site AllofMP3.com in London's High Court.

AllofMP3.com, which offers album downloads for as little as 1 pound ($1.85), is Britain's second-most popular online music service behind Apple Computer's iTunes Music Store, according to one survey. The Russian site claims to be in compliance with local copyright laws, but music labels say they have not given permission for AllofMP3 to sell their songs.

The High Court has given its approval to serve legal proceedings against AllofMP3 and its owner Media Services in Russia ahead of a UK court case, the British Phonographic Institute (BPI) said in a statement on Monday.

"The reason AllofMP3.com downloads are cheap is that neither the artists nor the record companies are being paid," said BPI General Counsel Roz Groome.

Earlier this year, U.S. lawmakers warned against signing a bilateral trade deal with Russia until Moscow moved to reduce intellectual property theft, including the shutdown of AllofMP3. Russian prosecutors are conducting their own investigation of the site.

The music industry has fought back against online piracy by promoting legal online music stores and cracking down on illicit file-sharing services and their users.

---

July 3, 2006

David Carr

A Blog Mogul Turns Bearish on Blogs

THE blogging bubble has been taking on serious air of late. Last week, PaidContent.org, a blog that covers digital media, held its first mixer. It was, by all reports, filled to the brim with money and content guys speed dating on the way to marriage.

Nick Denton, the founder of Gawker Media, was there, but he wasn't looking for love or money.

"It made me want to move to Budapest, batten down the hatches and wait for the zombies to run out of food," Mr. Denton said cheerily.

One of the overlords of the blogosphere with 15 sites and enough buzz to arm every doorbell in the nation, Mr. Denton has watched page views at his sites double in the last year; Gawker Media and Nielsen/NetRatings put monthly unique visitors at 4.2 million. So it comes as a bit of a surprise that Mr. Denton celebrated a very upbeat stretch in the blogging industry by putting two of his sites on the block, reorganizing others and laying off several people.

Laying off journalists? How very old media.

"Better to sober up now, before the end of the party," he said in announcing the realignment. As of last Friday, Sploid, a tabloid-infested site built on screen shots, and Screenhead, an aggregator of video clips, were put up for sale. Editors at Gawker, Wonkette, Gizmodo, and Gridskipper were moved or replaced. At a time when mainstream media companies are madly baking their own piece of blog pie, Mr. Denton was summarily executing underperformers.

"We are becoming a lot more like a traditional media company," Mr. Denton said last week. "You launch a site, you have great hopes for it and it does not grow as much as you wanted. You have to have the discipline to recognize what isn't working and put your money and efforts into those sites that are."

No one would ever accuse Mr. Denton of being a sentimentalist. A former reporter for the Financial Times, he made his money on First Tuesday, a social networking site that reportedly sold for $50 million, and Moreover Technologies, which sold for a reported $39 million. He then built a chain of professionally staffed blogs that eschewed media conventions like, oh, fairness and reporting, for brutal, well-turned takes on fairly mannered industries.

Gawker, Deadspin, a sports site, and Valleywag, a Silicon Valley blog, in particular, have gone beyond cult status with rapacious, real-time annotations. But while newer sites like Jalopnik, an auto-obsessed blog, and Kotaku, a gaming destination, took off, Sploid and Screenhead tanked.

BRACING candor is not the only relevant application at Gawker Media. Blogs, as they became a medium unto themselves, have generally been characterized not just by idiosyncrasy, but also by a publishing schedule known only to them. Not so at Gawker Media, where the writers publish early and often, delivering on the critical expectation that readers will always find new content.

And every site, regardless of subject, is built on speaking what mainstream reporters will only say sotto voce. It isn't journalism — as Mr. Denton and his pack of merry provocateurs happily remind — but it is the kind of media that attracts steady audiences that advertisers covet.

"I always thought that you needed to know the code for finding out what was actually going on when you read mainstream publications," he said. "We just say it. It is supposed to be the conversation that occurs between reporters at the bar after they have finished their stories."

Sitting in his apartment on Spring Street, he appears to be the epitome of the new media aesthetic, with the buzzing Sidekick and a wireless laptop on a metal counter surrounded by appliances that seem to be made out of titanium. The antithesis of the schmoozer — human beings are, at best, companion media to Mr. Denton — he stares at traffic numbers and incoming e-mails as he talks.

But the whole digital veneer masks a bit of a media traditionalist. His sites are arrayed over very common contemporary interests — celebrity, pornography, sports, Hollywood — that would not be out of place in mass magazines (a dead-tree medium, by the way, that he believes is far from dead). He thinks all of the bluster around blogs, fueled in part by AOL's purchase of Weblogs, has brought stupid money off the sidelines. He has felt the touch of clammy hands from venture capitalists more times than he would care to count.

"There is no doubt that there is a bubble right now," he said.

So why not cash out?

"Because it would be too hard to start over," he said. "Sites need to be well-managed and well-designed and even then it is harder and harder to launch a site. The world does not need more blogs," adding that if you count all the pages on MySpace, "there is approximately one reader for every blog out there."

For his part, Mr. Denton spends a lot more time reading computer code than blogs. He believes that the common software behind blogs isn't up to the task and now has 11 people, including 4 in Hungary, working on developing proprietary solutions.

He has a massive noggin and a quiet ego to match, but has very little interest in routine publicity. Mr. Denton is an advocate of Fleet Street standards when it comes to the lives of public figures, but his own business approach has more in common with the Kremlin at the height of the Cold War. He leaves editorial matters to Lockhart Steele, the managing editor of the sites, and would only comment on the profitability of Gawker Media by saying, "I haven't had to sell my apartment yet."

Mr. Denton, whose practice of poor-mouthing his own enterprise may have some competitive advantages, is not a complete blog bear. This summer, the company will introduce a music site, no doubt full of unspeakable truths and half-truths from behind the curtain. Mr. Denton thinks a few other opportunities are worth investigating, but is not making any bold predictions.

"The barrier to entry in Internet media is low," he said. "The barrier to success is high."