Category Archives: Digital Life

Two Smoking Guns and a Cold Case

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The copyright war just isn’t dramatic enough to warrant a good novel, let alone a big movie deal.

Consider a few recent stories from the on-going battle between content owners and consumers:

  • In October, sources reported to CNET’s Greg Sandoval that part of the document exchange between Viacom and YouTube in the on-going $1.1 billion infringement case revealed evidence that YouTube management knew about rampant uploading of copyrighted film and TV clips.  Worse, the source indicated that there was also evidence that YouTube employees were among those uploading unauthorized material.  (A YouTube spokesman responded that Sandoval’s characterizations were “wrong, misleading, or lack important context.”)

Sounds pretty exciting, doesn’t it?

Wrong.

In the Wolverine case, Sandoval reported a few days later that the man accused of uploading the stolen film, Gilberto Sanchez, had purchased a DVD “from a Korean guy on the street for five bucks.  Then I uploaded it.”  In other words, Sanchez apparently has nothing to do with the real crime—that is, whoever inside the industry managed to steal the pre-release version of the film and put it in circulation in the first place.  The real case may have gone cold.

And Viacom’s potential smoking gun was greatly undermined yesterday when it was revealed the company asked the judge in the case for permission to remove 250 of its claims of infringement.  Why?  Well, at least 100 of the removed claims involved clips that had been intentionally uploaded to YouTube by Viacom employees.  It turns out that Viacom and other content owners regularly used and continue to use YouTube to promote their programming by uploading clips and hoping they go viral.  (According to a YouTube lawyer who attended last month’s Supernova conference in San Francisco, those uploads are often done anonymously to mask the fact that the clip is a marketing effort.)

Make no mistake.  Sanchez’s uploading of the bootleg DVD of the movie still constitutes a copyright infringement.  And just because the owner of a copyright, in Viacom’s case, decides to license some of its content without receiving any royalties doesn’t in any way negate its right to pursue third parties who do the same thing without permission.

But the two stories underline that the problems of copyright in the digital age are much more complicated than the battle of good vs. evil Hollywood portrays.  Content owners continue to hide behind the rhetoric of “pirates” and “stealing,” arguing that every file share or on-line viewing, no matter how poor the quality, represents precisely one less customer paying full retail price.

The reality, clearly, is something very different.  The Wolverine movie viewed 4.1 million times was an unfinished copy, missing special effects and other elements (I didn’t see either).  It seems likely that some, perhaps most of those who watched the unfinished movie before it was released later saw the finished film in an authorized format.  It also seems likely that some who saw the unfinished movie wouldn’t have seen the real thing in any case, or were moved to see the real thing by what they saw in the pre-release.  (Think of it as a full-length trailer.)

Likewise, many who watched unauthorized YouTube clips of Viacom content may have already seen authorized versions of the same content and wanted to see it again without fussing with their DVRs or waiting for reruns, or may have been inspired by seeing a clip to start watching the program regularly.  Clearly Viacom’s marketing department thinks so, or they wouldn’t have put up at least 100,000 clips themselves.

I say “seems likely” because there’s no data to support these claims, or at best very incomplete data.  But there’s equally poor data to support the extreme view of copyright damages—that every unauthorized view is cash money out of the pocket of the content owner.

Copyright infringement in the digital age, in other words, isn’t about piracy and theft.  These cases are really about control over markets, many of which are new and emerging.  Their dynamics are still mysterious.  (Why does Viacom believe that an anonymous authorized post of a clip generate better buzz, for example, than an identified authorized post?)

Content owners shouldn’t be allowed to pursue damages—as courts often allow today and as Viacom is claiming in the YouTube case—on the theory that unauthorized uses are always destructive and always completely so.  That is, that unauthorized uses never help sales and indeed translate to fully-marked up losses.

Rather than thieves and pirates, we ought to be talking about productive and destructive uses of content.  A productive use, as I write in The Laws of Disruption, is one that adds more value to the underlying information than it takes away.  A destructive use has the opposite effect.

Media companies needn’t be so apocalyptic in their rhetoric if not their strategy when it comes to unauthorized uses, especially those (like clips and short excerpts) that inherently promote their products.

Giving up some measure of control is hard for these companies, because they believe in a binary world in which one either controls one’s content or loses everything.  I’m not sure that binary world ever existed, but in digital life it clearly doesn’t.

Indeed, in the Olden Days, the law used to recognize that copyright holders couldn’t always be trusted to license content to maximize their own best interests.  The law used to allow for short excerpts, quotes, and clips to be reproduced without permission, in the form of reviews, commentaries and parodies.

The old law was called “fair use.”  It made a lot of sense, but content owners have managed to use the courts and Congress to rob it of any real meaning.

We should really think about putting it back.

Comcast: The New Forces at Work

comcast logoMy op-ed today in The Hill (see “The Winter of Our Content,”) argues against those who want to derail the merger of Comcast and NBC Universal.  I don’t know enough to say whether the deal makes good business sense—that’s for the companies’ shareholders to decide in any case.  But I do know that every media or communications merger of the last twenty years has been resisted for the same reason—that the combined entity will both have and exercise excessive market power to the detriment of consumers.

That argument has turned out to be wrong every time.  It will be here as well.

Under the terms of the agreement, Comcast will get a 51% interest in NBC, Universal and several valuable cable channels including MSNBC and Bravo.  Comcast already owns E!, the Golf Channel, and other content, as well as being a leading provider of cable TV access, Internet access and, more recently, phone service.

A wide range of public advocacy groups have already objected that the new Comcast will be too powerful, and will have “every incentive” to keep programming it controls off the Internet, including new services such as Hulu, which is 33% owned by NBC.  Consumer groups also fear that Comcast will dismantle NBC’s broadcast network, all in the service of pushing American consumers onto paid cable TV subscriptions.

Why Comcast would want to use its leverage in the interest of only one part of its business I don’t understand.  But even if that was the goal, I very much doubt that goal would be achievable even with the new assets it will acquire.

As is typical in industries undergoing wrenching and dramatic consolidation and reallocation of assets, the urge to merge is a function of three principal forces, first introduced in my earlier book, Unleashing the Killer App. These forces—globalization, digitization, and deregulation—are themselves a function of the profound technological innovation that all of us know as consumers of devices, services, and products that didn’t exist just a few years ago.

There are several technologies involved here, including standards (the Internet protocols as well as compression and data structures for various media), software (the Web et al), hardware (faster-cheaper-smaller everything) and new forms of bit transportation, including cable, satellite, and fiber.  It’s the combination of these that makes possible the dramatic ascent of new applications—everything from Napster to YouTube to the iPhone to TiVo.  It’s why there are now hundreds if not thousands of channels of available programming, increasingly in high-definition and perhaps soon in 3D and other innovations.

With the advance of digital technology, driven by Moore’s Law and Metcalfe’s Law, all content is moving at accelerating speeds from analog to digital forms of creation, storage, and transport.  (This includes media content a well as user content—email, phone calls, home movies and photos.)  See my earlier post, “Hollywood:  We have met the enemy…”

That fundamental shift has made it easier to create global markets for content use and in turn has put pressure on regulators to open what had been highly-parochial approaches to  protecting the diversity of content.  Until very recently,  in the U.S. that diversity was represented by a whopping three choices of television programming—that of ABC, CBS, and NBC.

As globalization and digitization advance, the pressure to deregulate increases.  Caps and other artificial limitations of media ownership have been falling away over the last twenty years.  Clear rules separating who can transport data versus voice versus video make less and less sense, and have been removed.

Each of these changes has been resisted by consumer groups.  One long-forgotten change to the media industry occurred even before the rise of digital life, in the stone age of 1995.  That was the year the FCC eliminated the “financial syndication” rules, or finsyn, which had been adopted in 1970 to limit the power of the three broadcast networks.  (See Capital Cities v. FCC, 29 F.3d 309 (7th Cir.1994)).

Finsyn, among other controls, limited the ownership in prime-time programming the networks could obtain, and prohibited them from selling the programming they owned directly.  Once a program, say “Gilligan’s Island,” finished its prime-time network run, the networks could only syndicate it through third party syndicators.  The goal was to protect non-affiliated stations (mostly on the UHF band), who might not get a chance to buy syndicated programs at all if the networks kept control.  The networks might have only syndicated to their own affiliates.

Cable TV, which made the weak UHF signal stronger, along with the rise of Fox as a fourth network and independent producers who self-syndicated (particularly Paramount, which produced several made-for-syndication Star Trek series), made clear that the finsyn rules were no longer necessary.  The independent stations and consumer advocates fought to retain them anyway, and lost.

Of course we now have more diversity of programming than anyone in 1995 would have ever imagined possible.  Not because finsyn was repealed, but in spite of that fact.  Technology, left alone, achieved multiples of whatever metric regulators established for their efforts.

Those who object to the reallocation of industry assets see these deals entirely as efforts by vested interests to resist change inspired by what I called “the new forces.”  In part these deals are surely trying to hold back the flood.  They may even be motivated by the belief that consolidation translates to control.

But it never works out that way.  Consumers always get what they want, usually sooner than later, and regardless of what entrenched industry providers may or may not want.  Artificial limits on who can do what do more to hold back the technological inevitability than they do to protect consumers.

Resistance here is not only futile, it’s counter-productive.

Protecting consumers from Moore's Law: CNET

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I write today on CNET News.com (see “FTC’s new strategy:  kick ’em when they’re down”) that the FTC’s decision yesterday to attack Intel seems oddly-timed.

Regular readers of this blog will recall that only a month ago, I wrote that Intel’s settlement of long-standing disputes with rival AMD (see “The Intel/AMD Settlement:  Watch What Happens”) was likely to mean the end of government-sponsored litigation against Intel, or at least a toning down of the rhetoric.  I was, clearly, wrong.

It’s hard to know the real background here, but piecing together bits and pieces it appears that the FTC and Intel were close to resolving issues related to how the company sells CPU chips for personal computers when, perhaps at the urging of Nvidia and other graphics processing unit makers, the FTC began looking at the GPU market as well.  Intel flinched, the FTC got mad, and filed a complaint that recites all over again the issues that appear in most of the other litigation, plus the GPU complaints.

Hell hath no fury, it seems, like a regulator scorned.

Aside from the addition of GPU complaints, there are several important differences between the FTC’s action and the rest of the pending or already-completed litigation.  Most disturbing is the proposed remedy.  Instead of money damages and fines, the FTC is proposing, should it make its case, to dramatically redesign the way Intel–and therefore the rest of the semiconductor industry–does business.  Some of the relief the agency is seeking is, truly, draconian.  Intel would be essentially run by an outside monitor, and would need to pre-approve most transactions and even advertising with the FTC.

The FTC is charged with protecting consumers from fraudulent practices–false advertising, for example, or inadequate cigarette warnings, or misleading terms in credit card applications and the like.  It’s hard to see how it has anything to offer here by way of expertise in the chip market, which only affects consumers after-the-fact.  The likelihood that the agency’s actions will help consumers seems very very low.

It’s also hard to see what the harm to consumers (harm to competitors aside) can be.  As I write in The Laws of Disruption, the continued operation of Moore’s Law means that computing power gets faster, cheaper and smaller all the time–indeed, on a predictable schedule.  The PS3 that now sells for $299 is the rough equivalent of enough early-era computers to fill the state of Washington.  Today’s cell phones have more processing power than yesterday’s supercomputers.  And so on.

Well, the FTC replies, maybe if Intel didn’t have a monopoly on PC CPUs those prices would fall even faster.  Maybe, doubtful, but in any case, don’t they have bigger problems and more broken industries to mess with?

Memo to Andrew McLaughlin: Read the *** Constitution

In response to an earlier post on Net Neutrality, a reader asks if my “position changed since John McCain introduced his ‘Internet Freedom Act of 2009.’”  That bill, introduced as the FCC was announcing its proposed Neutrality rulemaking, is only one page long.  If passed, it would mean that the Commission could not “propose, promulgate, or issue any regulations regarding the Internet or IP-enabled services.”

The reader goes on:  “Essentially, McCain wants to make it so FCC has zero regulatory powers of the internet. So, if COMCAST wants to block Hulu…or charge usuers [sic] extra, then they can and will. It seems all that separates us from a doomsday scenario with the internet is a Republican controlled government, which will happen eventually.”

The short answer is that the McCain bill does not change my position at all.

First of all, I doubt that the bill, or the opposing “Internet Freedom Preservation Act of 2009,” have much chance of passage.  The focus of activity is clearly on the FCC’s proposed rulemaking.  If that fails, or if the courts determine that the Commission doesn’t have the authority to pass neutrality rules absent new powers from Congress, than the action may shift to the legislature.  If it does, I suspect something more substantive would be offered.  The McCain bill seems to have been offered as a sign of unhappiness over the FCC’s rulemaking rather than as a genuine effort to pass a law.

Even if the McCain bill did pass as written, by the way, it’s not entirely correct to say that the FCC would have “zero regulatory powers of the Internet.”  Even in a one-page law, McCain included a number of exceptions to the general prohibition, and the bill also makes clear that any regulations related to the Internet already in place at the time of the bill’s passage would not be superseded.  If, in other words, the FCC had already enrolled the new neutrality rules before the McCain bill became law, those rules would stay in place.

But there’s a much bigger point here I want to make.  The reader believes that absent the FCC’s meddling hands, we face an imminent “doomsday scenario with the Internet.”  It’s true that there would be no law to stop Comcast from blocking Hulu, nor a law that would stop Comcast from charging extra to users who wanted that content.  But that wouldn’t mean Comcast would or could do either of these things.  Even if they did, I don’t understand the hyperbole that doing so constitutes the end of the world as we know it.

To me, the biggest hole in the neutrality-or-apocalypse argument is the idea that the best–indeed, the only–defense against corporate interference with Internet content is the federal government, and specifically the Federal Communications Commission.  Often that argument comes from those who are otherwise, and rightly, skeptical of the motives or abilities of the federal bureaucracy to look out for consumer interests.

But somehow when it comes to neutrality, all of the disappointments, suspicions, and failures of government, in particular the FCC, are put aside.  The government—or anyway the current administration—believes in the open network, the argument goes, so we can trust them to regulate it in our best interests.

I’m not willing to suspend my disbelief in the face of so much evidence to the contrary, visible in communications policy and everywhere else.  But for those who need more evidence that the federal government is less likely to preserve the open network than the communications industry, look no farther than the White House.

As reported two days ago by the Washington Post’s Cecilia Kang, White House Deputy Technology Officer Andrew McLaughlin told attendees at a recent conference that the Obama administration is committed not only to neutrality but to global free speech, and that indeed, neutrality “underlies free speech on the Web.”  The two are “intrinsically linked,” according to McLaughlin, because without neutrality, there is the possibility of censorship.

“If it bothers you that the China government does it, it should bother you when your cable company does it,” McLaughlin, whose was previously responsible for global policy for Google, was quoted as saying.

The First Amendment, in other words, ought to apply to Internet access providers, and the White House sees Net Neutrality as the mechanism for ensuring that it does.

There’s just one problem with this description of the administration’s plans:  it has utterly no basis in the U.S. Constitution.

As any first-year law student (or, indeed, any reader of The Laws of Disruption) knows, the First Amendment protects citizens from interference of their speech by the government. There is no legal basis to McLaughlin’s view that it applies to private actors, whether cable companies, employers, or your mother-in-law.

Private censorship of specific content, of course, is bad.  But it is not a “free speech” problem.

(McLaughlin might be excused from this gaffe by the fact that he was speaking at a conference rather than in writing.  But no, the White House Office of Science and Technology Policy has since defended the comments.)

There are very good reasons why the First Amendment applies only to the government.  The government is the only body that has the coercive power of the military, and the power to deprive individuals of their liberty through imprisonment.  The Founding Fathers had good reason to fear interference with political speech by those with that kind of power.  So under the First Amendment, you can say all you want about McLaughlin’s views.  All he can do is refer you to the NSA for secret surveillance.  Oops.

But there is no right to free speech that U.S. citizens or their government can assert against private actors.  You have no right to proselytize your religion in the office.  You cannot stage a protest on behalf of native plants in the middle of the Safeway.  You don’t get to walk into the local newspaper and demand they print your version of the news on page one.  Your five year old cannot practice foreign curse words in school without fear of being suspended.

As those examples suggest, extending the First Amendment to everybody to assert against everybody else would be catastrophic.  Democratic society depends on a “marketplace of ideas” free of government interference.  But free of private restrictions, the marketplace becomes noise and the participants a mob.

Internet access providers can, do, and should limit what their customers do in a variety of ways for a variety of reasons.  They can limit the amount of shared bandwidth a customer can use at any given time.  They can block applications for wireless customers that the wireless network doesn’t have the capacity to handle.

And yes, they can even decide that certain websites aren’t suitable for their customers based on whatever misguided reason they have.  (Many local cable companies do in fact limit the channels their subscribers can watch based on personal morality.)  Doing so would be bad business, but it would not be a violation of “free speech.”

McLaughlin has it backwards.  The First Amendment protects even bad business decisions from interference by the government.  “Free speech” doesn’t underlie the open network.  Rather, it restricts the FCC from telling access providers what content they can or cannot promote or block.

Thank goodness it does.  Because there’s absolutely no doubt what the government would do if it had that power.  In the last ten years, administrations under both Republican and Democratic control have passed three different laws banning “indecent” content from appearing on the Internet.  (President Clinton signed the first and worst of these, “The Communications Decency Act.”)  State governments have tried even more offensive “experiments” with controlling Internet content, as I describe in Law Three, “Social Contracts in Digital Life.”

The Supreme Court rejected two of the federal laws as violations of the First Amendment; the third was narrowly upheld as a restriction on libraries accepting government funding.  The FCC, meanwhile, still relishes its narrowly-allowed content control powers over broadcast television to ensure errant nipples and swear words don’t appear on live broadcasts.

It’s more than a little ironic that the White House is accusing cable companies of Chinese-style censorship for twice blocking bandwidth-hogging peer-to-peer applications.  All the evidence we have is that it is the government that would have done the real damage to the free flow of information on the Internet.  Would have, that is, if they hadn’t been blocked by the First Amendment.

In any case, it’s not as if all that stands between Internet users and the gaping abyss is an empowered FCC.

Who else will protect consumers from misguided or even evil corporations?  How about the consumers themselves?  Many would be unhappy with any significant interference with the free flow of information imposed for financial or other reasons by an Internet access providers.  Believe it or not, even communications companies have to be responsive to customers sometimes.

At least for the past 200+ years of American history, most complaints and disagreements between service providers and their customers have been resolved efficiently and quickly by market forces.  If consumers don’t like restrictions imposed by a service provider, they are free to find a more enlightened or more generous provider, or pay higher fees to use more resources, or work with their local municipality to implement free WiFi service.

You can even start your own ISP—and if you do, the FCC will make sure the phone company leases its entire network to you at bargain basement prices.

If the market is broken—if real censorship takes place, and consumers find they have no other choices, and structural problems exist that make it unlikely other choices will emerge—the government already has the overused and misunderstood tool of antitrust to fix it.

But before you start storming the Bastille demanding the micromanagement or nationalization of the communications industry, consider for a moment not the odd examples where the system doesn’t work but all the times when it does.

And then consider how much worse it might be if the FCC took over “enforcement” of the open network principle.  The current administration might have one set of priorities about what constitutes “open,” but the rules will live on much longer than that.  The FCC’s proposal is not to establish specific rules in any case, but to evaluate complaints of non-neutral behavior on a “case-by-case” basis.  You know, like they do with broadcast content today.  How’s that working out for us?

We don’t need “free speech” to protect us from access providers.  We need it to protect us from the wolves in sheep’s clothing who claim to be working for our best interests.

SOC: Tempest in the Back of Your TV

mpaa logoI’m fascinated by the firestorm that has erupted over what sounds on paper like the most boring combination of a legal and technical discussion: the recent appeal by Hollywood for a waiver from the FCC’s Selectable Output Control (SOC) rule.

First a little background, greatly simplified. (Those wanting the gory details can read the excellent coverage of the story over at Ars Technica.) Older television sets receive cable programming through analog component wires. Newer TVs include the old analog interface but also added digital ports, such as HDMI, that can reproduce a higher-quality picture.

The SOC rule, adopted in 2003, prohibits content providers (including cable and phone companies offering television content) from manipulating transmissions in a way that turns off or otherwise disables the analog ports, which would have forced consumers either to use the digital interface or, if they don’t have those ports, buy a new set that does.

In addition to quality, the other relevant difference between analog and digital outputs is that the latter can be programmed to obey increasingly sophisticated forms of digital rights management (DRM), used to limit the reception, quality and use of received content. HDMI interfaces, among other features, support signal encryption that ensures the output is being directed to an authorized device—a television set registered for on-demand viewing, for example.

The MPAA has asked the FCC for a waiver to allow studios to broadcast new movies before they are made available on DVD. To make such broadcasts more secure, the MPAA wants permission to block the signal from being output through the analog interface. While digital outputs can be hacked and DRM bypassed, the MPAA believes that the most likely and most dangerous form of piracy of these early releases would come from users with active analog ports–what is sometimes referred to as “the analog hole.”

If the waiver is granted, content providers would be able to disable analog ports when transmitting early-release movies to the set. The digital ports could then be manipulated to ensure that the programming was not copied in violation of the new service’s terms.

The MPAA’s request is being supported by content providers including cable TV, satellite, and phone companies, as well as some device manufacturers. The principal opposition is coming from the Consumer Electronics Association, the main trade group for device manufacturers, as well as a coalition of public interest groups including Public Knowledge and the EFF. (See CEA President Gary Shapiro’s open letter to the FCC on The Huffington Post and John Bergmayer’s “SOC in Context” at Public Knowledge, as well as Ars Technica’s Matthew Lasar’s response to the cable industry.)

This is not an open-and-shut case, though both sides would like to characterize it as such. The objectors argue that consumers who only have analog outputs (25 million, according to CEA) should not have their TV’s “broken” by SOC, in essence forced to upgrade to newer TVs if they want to watch early releases of new movies.

They also point out the there is no evidence that content piracy has anything to do with home viewers intercepting transmissions and translating them to media or file-sharing copies through analog interfaces or otherwise; that, indeed, the most significant source of piracy for new movies comes from insiders who get hold of production copies before or soon after movie releases.

The public interest groups are particularly concerned that a SOC waiver here is at best a Trojan Horse, giving the entertainment industry a foot in the door to control the use of more kinds of broadcasts, including those for which today there are no or fewer restrictions.

The waiver could be a start, in other words, toward more restrictive content limitations, along the lines of so-called “broadcast flag” technology embedded into TV sets that Hollywood had earlier convinced the FCC to mandate. (A federal appeals panel laughed the FCC out of court on that one, reversing the Commission as wildly out of its jurisdiction.)

Ultimately, the public interest groups believe, the SOC waiver could lead to the end of long-established rights for viewers to record and time-shift programming, a right that the Supreme Court underscored nearly 25 years ago when the same parties asked for a ban on VCRs.

The requested waiver, however, doesn’t apply beyond the “narrow” exception of the early-release movies. (A number of companies, including TiVo, have urged the FCC to allow the waiver, but only after significantly tightening up just how narrow the exception really is.) And supporters point out that without the SOC waiver that new service simply won’t be offered, harming everyone.

As the National Cable & Telecommunications Association (NCTA) put it in a letter to the FCC, “MPAA has sought waiver of the ban on SOC to permit [content providers] to provide consumers with more viewing options, which can only be made available if the ban on SOC is waived.” (emphasis added)

The implication of that statement is that the SOC waiver is a kind of technological requirement for early-release movies, which isn’t the case. What the NCTA means is that without the waiver, Hollywood won’t risk showing movies before DVD releases for fear that piracy will undermine the subsequent market for media.

Well, maybe. But even absent rampant piracy, the likelihood is that DVD and other media purchases will continue to decline (see “Hollywood: We Have Met the Enemy”) and the studios will be forced into new (potentially more-profitable) on-demand and/or subscription models. Indeed, Warner Home video is already experimenting with early release video-on-demand for new movies even without a SOC waiver.

I share the public interests groups’ fears of a slippery slope. As I write in “The Laws of Disruption,” since the advent of the Gutenberg Press, content industries have demonstrated an uncanny consistency in lobbying and litigating against every new consumer technology that threatens their control over distribution and use, including several that have, ironically, saved them from extinction.

Consumers are understandably wary of promises from their content providers and the entertainment industry that a small inconvenience is needed in order to give consumers what they want. There’s something frankly irritating not so much in the argument but in the tone with which the NCTA is making its case (“sounds like a slam dunk to me, but surprisingly, some object” NCTA head Kyle McSlarrow writes. Come on!)

On the other hand, the SOC waiver, more narrowly defined, won’t take away any abilities or rights consumers have now. Though the analogy isn’t perfect, consumers who want to see HD broadcasts must buy HD television sets. The MPAA is arguing that it won’t offer pre-release movies if it can’t stop them from coming out an analog interface. (Technically, of course, they can come out that interface.)

Eventually, the 25 million analog-only TV sets left in the U.S. will be replaced anyway, and the “analog hole” will be plugged with more secure (though hardly bulletproof) digital technology. At that point the analogy is a little better: if you want the new service, you need to plug it into a port you will likely have and not one that you have but which isn’t permitted.

In the end, I’m with TiVo and Sony (both a content producer and a device manufacturer), who “now believes that under certain, very narrow, circumstances, SOC could bring benefits to consumers that on balance would outweigh any potential drawbacks.”

At the same time, I’d sure like to see Hollywood and its partners stop listening to consumers with such a tin ear. If they devoted even a fraction of the energy they put into trying to control the uncontrollable into experimenting with a holistic approach to offering access through all the channels—media, on-demand, virtual libraries, etc.—consumers are interested in, these fights could largely be avoided. Profits would be higher and more secure, and the pressure for piracy would be greatly diminished.

As Internet Research Group’s Peter Christy puts it, “The Internet is playing a fascinating role here by enabling experimentation. In the end the content owners are king, and their objective is maximum revenue capture from a menu of distribution alternatives. I think they are starting to know enough data not to act in way that will cost them money.”

I’m not quite that optimistic.  But I hope he’s right.