iTunes Movie Rentals, DRM, and The Big Problem™

On Tuesday morning, Apple announced the all-new Movie Rentals in the iTunes Store. Fantastic idea, god-awful implementation. Here are a few points to add clarity to how bad we’re in trouble, and how completely out-of-touch Big Media is with the real world.

1. iTunes Movie Rentals debut 30 days after physical DVD releases. — That’s right, 30 whole days. Why? I have no idea, other than Big Media wants to get people to drive down to their local Walmart store and purchase a physical box with a physical disc in it first. Here’s the problem: In the high-bandwidth digital world that we currently live in, distribution costs are next-to-zero. However, in the archaic world that Big Media lives in, whoever solves the [physical] distribution problem makes the most money. The problem is that distribution is no longer a problem (now that we’re in the digital age), and Big Media is still trying to solve it. (See Sony’s DRM-Free Gift Cards.)
2. iTunes Hi-Definition Movie Rentals are only for AppleTV, not for computers. — You’ve got a 20-inch monitor and a 640×480 resolution movie playing. Seriously? Why? Oh, because Big Media wants to charge a premium for HD content, and if it ends up on a fully-functional computer then the DRM might get broken, and they would lose control of the content. Nevermind that I’m watching a tiny video on a giant monitor/TV/whatever. And nevermind that I don’t have an AppleTV.
3. HD content is available to rent, not to buy. — You can rent HD content on your AppleTV, but you absolutely can’t buy it. Why? Because Big Media wants to get people to drive down to their local Walmart store and purchase a physical box with a physical HDDVD or Blu-ray formatted disc in it. Oh wait, you have a Playstation 3 so you want watch Blu-ray movies, but Bourne Ultimatum is only available in HD in HDDVD format. I guess I’ll need to spend another $300 for an HDDVD player as well.

Now, for a consumer who owns an AppleTV, the fact that they can rent movies directly from their TV without having to drive to the video store is pretty handy. For the rest of us that are more digital media savvy, it is absolutely amazing to me that Big Media is so out of touch with their customers that they would do this to them.

Now, let’s look at the reality:

1. Having two competing HD formats is bad for consumers. — Lots of people have either Playstation 3’s, Xbox 360’s, Tivo HD’s, and relatively modern computers. Why are we wasting shelf space with physical discs where some movies are in one format and other movies are in another format. Digital 720p/1080p movies should be Big Media’s biggest push right now, and it’s not. Lost money, right there, lying on the floor.
2. Having insane DRM restrictions hurts consumers. — Why waste the time with heavily DRM-laden content, when I can just get DRM-free HD content from the darker places on the internet (the “DarkNets”)? After reading about how this guy’s Netflix downloads wouldn’t play because of the monitor he was using, you can bet I’ll never use the Netflix service, Amazon Unbox, or Windows Vista… EVER. I’ll just download content from the DarkNets because the currently-legal-yet-ridiculously-broken models for digital media suck for consumers.
3. The DRM used by the Blu-ray and HDDVD formats has already been broken. — It’s only a matter of time before more people buy HDDVD and/or Blu-ray drives for their computers, crack the DRM on movies they rent, and post those consumer-friendly files on the internet. That business model (give away good stuff for free) is far more effective — and will ramp up faster — than either Blu-ray or HDDVD will in the marketplace.

Now, here’s my proposal: What if, instead of causing consumers grief with ridiculous restrictions on HD content, what if there was a way to monetize the flow of this content across the internet? Where money was made, not by restricting the content beyond belief, nor by forcing people to drive down to their local Walmart store and purchase a physical box with a physical disc, but by monetizing the free flow of the content. The more the content flows, and the more people who share HD movies over P2P, the more money is made.

What would that world look like? Consumers would certainly be happier because they could get whatever they wanted, whenever they wanted it. Labels and Studios would be happy because they’d be making more money than ever before by embracing this new model. Everyone wins, right?

All I’ll say is this: WarpShare. Keep your eyes and ears open folks. More information is coming soon.

Oh, and for anyone keeping track of the current score, Piracy is beating Legal Solutions: 489,672,211,642–0.

Proof that the youth are revolting

Update: See images of Digg’s homepage at WordDissociation.com.

I’ve been sitting here for 10 minutes trying to think of a good opening line, and I can’t. I’m speechless. Something very intriguing is happening this very moment: The users of Digg are outright revolting. This is the digital equivalent of the Los Angeles riots. But what’s more interesting is the fact that as of 9:00pm PST, Digg is letting them. (As I was writing this, Digg went down. This is getting more interesting by the minute…)

In the US, there is a law known as the DMCA — a heavily flawed and much hated law among consumers of digital media (including DVD’s, HD-DVD & Bluray discs, and most downloadable songs and videos) that is often used by the Recording and Movie industries to justify suing people and shutting down services. (A side note is that they’ve never quite figured out how to use digital media sales to their advantage, and so they’re just shutting people down instead of working with them to find a more consumer-friendly solution. Acting out of fear is never good.)

The other major thing that the DMCA does is stops people (legally anyway) from bypassing or cracking something called DRM (“Digital Restriction Management”). DRM is the locking mechanism that stops you from downloading songs or videos from iTunes and putting them on your non-iPod player. It’s the locking mechanism that stops you from copying DVD’s. A new kind of DRM known as AACS is what locks the next-generation HD-DVD and Blu-ray movies/games so that you can’t copy them or back them up on your computer. (Sony’s Playstation 3 has a built-in Blu-ray player while Microsoft’s Xbox 360 has an optional HD-DVD player.)

Recently, (and I’m trying to remember here) someone posted a code (known as a “key”) that allows programmers to build software that bypasses this locking mechanism allowing people to copy these next-generation DVDs. Naturally, this is illegal and the movie industry sent a cease-and-desist letter trying to get them to remove the key from public view. So be it.

Earlier — I’m assuming today — someone re-posted this key to Digg and the movie industry sent a cease-and-desist to have it removed. Digg complied. Someone else caught wind of this, and re-posted it. Digg removed that posting as well. After a bit of back and forth, the following was posted on the Digg blog this afternoon:

Whether you agree or disagree with the policies of the intellectual property holders and consortiums, in order for Digg to survive, it must abide by the law. Digg’s Terms of Use, and the terms of use of most popular sites, are required by law to include policies against the infringement of intellectual property. This helps protect Digg from claims of infringement and being shut down due to the posting of infringing material by others.

Our goal is always to maintain a purely democratic system for the submission and sharing of information – and we want Digg to continue to be a great resource for finding the best content. However, in order for that to happen, we all need to work together to protect Digg from exposure to lawsuits that could very quickly shut us down.

Thanks for your understanding.

Instead of working together, the users of Digg began outright revolting. The AACS key was posted over and over and over again is a number of different ways. So much, in fact, that 98 of the last 100 stories to hit the front page of Digg are posts about that key. Digg has been banning posts and users all day long, and the users are fighting back with full force.

Around 9:00pm PST, there was another post on the Digg blog that said the following:

Today was an insane day. And as the founder of Digg, I just wanted to post my thoughts…

In building and shaping the site I’ve always tried to stay as hands on as possible. We’ve always given site moderation (digging/burying) power to the community. Occasionally we step in to remove stories that violate our terms of use (eg. linking to pornography, illegal downloads, racial hate sites, etc.). So today was a difficult day for us. We had to decide whether to remove stories containing a single code based on a cease and desist declaration. We had to make a call, and in our desire to avoid a scenario where Digg would be interrupted or shut down, we decided to comply and remove the stories with the code.

But now, after seeing hundreds of stories and reading thousands of comments, you’ve made it clear. You’d rather see Digg go down fighting than bow down to a bigger company. We hear you, and effective immediately we won’t delete stories or comments containing the code and will deal with whatever the consequences might be.

If we lose, then what the hell, at least we died trying.

About an hour and a half later Digg went down. It’s been 45 minutes since then. I’m interested to see how this all shakes out.

Staying Relevant

I’ve been thinking lately about how to stay relevant in our booming and ever-changing web industry. I’ve been watching successful relative newcomers like MySpace, Digg, YouTube, del.icio.us, Last.fm, Flickr, Newsvine and Twitter to get a sense of what they are/aren’t doing. I’m trying to understand what they have (to attribute their success to), and do not have (to attribute their lack of blockbuster success to), and what are all of these companies doing that are better or worse than the behemoths like Apple, Google, Yahoo, AOL, and others?

MySpace definitely hit the jackpot in terms of users. With over 20 million users, MySpace has to be doing something right. Many movie and music websites are foregoing standard www.com websites in favor of myspace.com/whatever websites. This says a lot about the kind of draw that MySpace has! What MySpace sacrifices in terms of solid usability, reasonable uptime, good design, a web services API, and respect from the web standards crowd, they make up for with their network of people — especially for those under 35 or so.

I have a MySpace account because my best friend said “Hey, you should get a MySpace account.” That was enough to get me to sign up, but not enough to get me to stay. Why did I stay? Because I can find nearly everybody I’ve ever known in my life on MySpace. MySpace has allowed me to get back in touch with old friends from high school and otherwise that I haven’t talked to in years. People aren’t there to share interests… they’re there to share themselves with people they know. THAT’S the major differentiator! People gathering around interests with other strangers is one thing, people keeping up with their past and present friends is on another level.

Social bookmarking services like del.icio.us have been successful for two reasons. The first is that they solve the problem of keeping track of bookmarks across browsers and computers. Simple enough. The second is that del.icio.us makes it really, really easy to add bookmarks to their service. They’ve lowered the barriers to the point where it’s as easy to add a bookmark to del.icio.us as it is to add it to your browser. Lowering and/or eliminating barriers while solving a common frustration makes for a great service. Other services are doing a good job too (I recently switched from del.icio.us to Ma.gnolia for my social bookmarks) because I think they’re technically better, and it looks better as well. There are some really cool social features built in that make it a better choice. The only complaint I have with Ma.gnolia is that sometimes it feels like the design gets in the way. You don’t get that with del.icio.us.

Services like Digg and Newsvine are really cool for a number of reasons. First of all, my time and attention are very important to me. I don’t want to have to read through all of the worthless posts just to try to find the gold nuggets of information scattered around. Social news sites like Digg and Newsvine are pre-filtered for me. They’ve already gone through a (fairly) rigorous screening process, and I only see topics (on the homepage) that the rest of the community thinks are worthwhile. Where I think Digg and Newsvine diverge is that technologists are a very passionate people, and Digg was built around technologists. Newsvine tends to be more general news, and you simply have less passionate users there. I’m not saying that people who are into politics and world news aren’t passionate, I’m just saying that technologists seem to be more passionate about their preferred topic, which is why Digg is the front runner and Newsvine is still coming along.

YouTube is far and away the front runner on the social video front. I can’t quite put my finger on why they took off as quickly as they did, other than they got a ton of buzz in two networks: MySpace and the Blogophere. YouTube videos are really easy to get into MySpace profiles and blog posts, in a video format that loads very quickly, and they used industry standard technologies (Flash) rather than creating yet another format that people need to download a plugin for. On that last point, they did the same thing that del.icio.us did… they lowered the barriers to the point where they simply didn’t exist by going with Flash Video. As a consumer, the only thing I have to do to get a YouTube video on my homepage or MySpace profile is to copy and paste a single line of code that I don’t even need to understand.

Music related services like Last.fm, MOG, and MyStrands are doing something smart: They’ve all got plugins for the popular desktop music players (iTunes, Winamp, Windows Media Player, etc.). All I have to do is listen to my music in iTunes while I’m working or MySpacing, and that data gets uploaded to the aforementioned services. Those services take that data and calculate things like favorite artists, tags, music recommendations, and other music-related things. I think it’s really cool that I can be introduced to new music simply by listening to some of my favorite tracks while I’m working. Again, they’ve taken all of the work out of getting people to use it, making it more attractive than services where I have to invest more time and attention that I’m already in short supply of.

Flickr isn’t the largest or most popular photo sharing service, but it’s certainly the best. Flickr is focused around sharing your photos, and — again — they’ve removed the barriers from sharing/viewing photos that many other less successful services still have in place. My friends Ben and Jen share photos of their son with their Snapfish account. Can I view those pictures easily? No. First, I have to give Snapfish my email address (no-no #1), and then I have to let them bombard me with with notices telling me to purchase prints for so many cents a print (no-no #2). If they had Flickr, they could simply send me a URL for the photoset via email, and I could look at the pictures. Simple. Easy. No problem. I haven’t seen pictures of their kid in over a year because I don’t trust Snapfish or Hewlett-Packard (the parent company).

Photobucket is (I believe) the largest photo sharing service on the internet at the moment. Why? The only reason Photobucket is #1 is because they did the best job riding the MySpace wave. The service isn’t all that great, I can’t do cool things with my photos because they have no API, and their first wave customer support is worthless. Photobucket is not a compelling service, and I don’t think they’ll be around for more than a couple more years. User-oriented services like Flickr will be around much, much longer.

Lastly is the Twitter phenomina. People either love are addicted to Twitter, or they hate Twitter. My friend Matt used Twitter for a day or two, and couldn’t stand it. I believe he said something along the lines of “I’d rather have someone mash fistfuls of sand into my eyeballs with a hammer than to use the Twitter UI again.” Me, on the other hand? I post a new status every few hours, and it’s an interesting way to see what other bloggers do/say/think when they’re not trying to compose a piece of writing for the whole world to read. I don’t know whether to call Twitter “successful” or not — I think the jury’s still out on this one — but they’ve definitely got an active community growing, and that’s a valuable thing to have.

So, the take-away points from these ramblings are:

• The network of users you have is very valuable. More is better.
• Networks of friends are more valuable than networks of strangers.
• Lower the barrier to entry to the point where the barrier simply doesn’t exist.
• People’s time and attention are very valuable. Do the work so they don’t have to.
• Have passionate users. If you can’t find them, make them.
• Being someone’s addiction is okay too, and sometimes can even be better than someone’s source of productivity.