1. Introduction History Lesson History Lesson –DRM, or How Not to Innovate Panic! Panic! –Suing the Fans, Capturing Governments, & Drafting the ISPs Opportunities for Artists and Online Distributors Opportunities for Artists and Online Distributors

2. New Technology Always Frightens Existing Content Industries YearTechnologyResult 1908 Player Piano Compulsory License 1920s Radio BMI/ASCAP License 1964 Cassette Tape None 1968 Photocopier None 1968 Cable TV Compulsory License 1976 VCR Sony – DMCA §1201(k) 1990 DAT Recorder Stay Tuned 1996 DVD Industry Agreement 1998 MP3 Player Stay Tuned

3. Late 1980s Threat to the Music Industry DAT DAT Music Industry Reaction Music Industry Reaction SCMS (Serial Copy Management System) SCMS (Serial Copy Management System) Computer Industry Reaction to SCMS & Legislation Computer Industry Reaction to SCMS & Legislation The Audio Home Recording Act The Audio Home Recording Act RIAA v. Diamond Multimedia RIAA v. Diamond Multimedia

4. Secure Digital Music Initiative (SDMI) First Response to MP3s - 1998 Record labels organize SDMI; equipment manufacturers and software companies join Record labels organize SDMI; equipment manufacturers and software companies join Call for development of a single digital rights management (DRM) standard to protect downloads & transfers of copyrighted files Call for development of a single digital rights management (DRM) standard to protect downloads & transfers of copyrighted files CE & IT hoped: facilitate new methods of Internet digital distribution of music CE & IT hoped: facilitate new methods of Internet digital distribution of music Instead… Instead…

5. SDMI Compliance, Diagrammed

6. SDMI: A King Canute Solution? 1998-2000 Industries Differ on Digital Distribution Agree DRM Useful, But IT says Legacy CD Unprotectable SDMI Devices Market Failure & SDMI Moribund 1999-2005 Unprotected MP3 Players & P2P Increasingly Popular Record Industry in Disarray Blames Piracy –C–C–C–Challenging competition – Mark Cuban on Piracy –C–C–C–Changing tastes –C–C–C–Changing business model: Edgar Bronfman (CEO Warner Music) –S–S–S–Sue their customers

7. The Global Regulatory Climate: Outsourcing Enforcement ISP Filtering/Secondary Liability/Three Strikes ISP Filtering/Secondary Liability/Three Strikes –EU Telecom Package, UK MOU, French Draft Act, ACTA –Graduated Response (Three Strikes) –If filtering makes business sense, pay for it! –Proven to fail –French filtering study, Belgian ISP case US ENFORCE Act – Passed Senate 9/26/08 US ENFORCE Act – Passed Senate 9/26/08 –DOJ Civil Enforcement Removed from legislation Bush Admin.: Will Not Do Pro Bono Legal Work for RIAA/MPAA Bush Admin.: Will Not Do Pro Bono Legal Work for RIAA/MPAA –Still Provides for IP Czar in Executive Branch –Stiffer penalties for infringement Still suing fans Still suing fans –30,000+ in US

8. Opportunity Pings Artists Should Be in Control Artists Should Be in Control –Do you need legacy labels? –You are scarce –Use tech to know and serve your audience Artists, Labels, IT/CE, Regulators Choice: Artists, Labels, IT/CE, Regulators Choice: –Clamp down, attempt to regulate ISPs & Devices, keep alienating fans (lawyers win, everyone else loses) –Innovate, monetize P2P, something radical!