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February 2003

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The DMCA: A Year of Trials and Errors


by Glen Emerson Morris

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The 2002 Christmas season turned out to be the worst season in 30 years for traditional retailers. However, it was also the best season e-commerce retailers ever had. Whether the rest of the year will be as good for Internet marketing is still in the balance.

As print and broadcast media ownership is reaching unprecedented levels of concentration, Internet advertising is becoming an increasingly important alternative to traditional media. In an ideal world, the rise of Internet-based broadband communications would act as a brake on the ever-increasing rates charged by the five major media conglomerates. However, we do not live in an ideal world. We live in a world with the DMCA, otherwise known as the Digital Millennium Copyright Act.

Under provisions of the DMCA, the government set music royalties rate so high that Internet radio stations will never be able to compete with broadcast or cable media. The best that advertisers can hope for under these circumstances is that a third licensing agency is founded that will offer reasonable rates. This is actually a possibility, since the situation is almost an exact replay of what happened the last time a fundamentally new media evolved.

In 1940, when ASCAP attempted to raise radio licensing fees by 100%, or 10% of all ad sales, the broadcast industry formed its own licensing agency, BMI. (The "B" in BMI stands for broadcast). By the end of 1940, 650 broadcast stations had signed with BMI, and ASCAP was in damage control mode.

Internet media is in about the same predicament as radio was in 1940. It's a new media, it can't afford the royalty rates it's being asked to pay, and it will never evolve unless rates are lowered. Founding a non-profit licensing agency similar to BMI would solve the problem completely. Just replace the "B" in BMI with an "I" for Internet.

Of course, it might make more sense to get rid of the DMCA, which is the heart of the problem. To some extent this is happening already. The DMCA is beginning to suffer setbacks in court, here and abroad.

In Norway, a person on trial for making a driver that bypassed DVD copy protection so he could watch DVDs on his Linux computer was found not guilty. The judge ruled that essentially he had been charged with breaking into his own property.

In San Jose, a Russian company on trial for making software that allowed people to make copies of electronic books they owned was also found not guilty. The case had originally been instigated on a complaint by Adobe, but as soon as Adobe realized what a public disaster it was turning out to be for them, they dropped their complaint. The US Government decided to pursue the case without Adobe, and was soundly defeated even after a getting one of the Russian engineers to turn state's evidence.

The jury's not guilty verdict was a classic case of jury nullification. There was no doubt the Russian company violated the DMCA, the government proved their case beyond any reasonable doubt. The problem was that once the jury understood the law, they were not willing to enforce it.

In another case pending, a company is in court because they make software that allows consumers to make backup copies of DVDs they own. The outcome may determine how fast the recordable DVD market grows.

Many television advertisers think recordable DVDs are just a new technology to allow TV viewers skip commercials. Maybe. But recordable DVDs are also a way for consumers to record and save commercials. Not all consumers fast forward through commercials, and some even record favorites (like the Gecko commercials.)

The best way an advertiser can be sure viewers will record their commercials is to make engaging and entertaining commercials, not make it technologically impossible for viewers to avoid recording them.

American advertisers might consider the approach European television commercials have taken. European commercials tend to be entertaining side, and given that nudity in European TV commercials is relatively common, European advertisers seldom worry about consumers fast forwarding through, let alone skipping, their commercials.

Drastic as it might be, the European approach might be a better alternative to recent attempts to integrate commercials into television content itself, which will likely compromise the quality of the show, and the commercial, too. Integrating ads with shows has been outlawed for decades on grounds of conflict of interest, and for good reason. If the public owned the media that allowed heroes to be made, it had a right to expect the influence of the heroes would not be used to promote one corporate brand over another. What if the Lone Ranger had only used Acme Boots, or even worse, Acme Bullets? (Celebrity endorsements are acceptable, naturally, but the endorsement should never come while in character.)

Of course, there would be nothing to keep Internet radio advertisers from making an entertaining show out of a commercial, and taking half an hour, or an hour, to do it. The Internet may be the airwaves of the public, but the Internet is definitely not the public's airwaves. Unlike the broadcast frequency spectrum, the Internet is just owned by those who pay the bills. The only thing stopping an advertiser from starting their own Internet radio or video station on the Internet is the cost of music, as determined by the DCMA.

It is not the purpose of this column to charge the committee that set the Internet royalty rates with catering to corporate interests. No proof to support such a claim exists to our knowledge. However, we have to note that if it had been the intention of the committee to kill Internet radio as an advertising media, it would have been hard for them to have done a better job.

Even so, Internet radio may still have a chance. Public outcry from consumers is making politicians rethink certain provisions of the DCMA, and courtroom setbacks are making it difficult to enforce. If advertisers were to speak out against the DCMA now, it might add up to enough pressure to get it repealed. It would take some effort, but it would be worth it.

Especially when you consider that the alternative is to sit back and watch advertising rates continue to climb until you can't afford to be in business anymore.

Glen Emerson Morris is currently Senior Quality Assurance Engineer responsible for e-mail services at Yahoo.com. Previously, he was a consultant for Ariba, WebMD, Inktomi, Apple, and Adobe.

Copyright 1994 - 2010 by Glen Emerson Morris All Rights Reserved

' keywords: Internet advertising, Internet marketing, business, advertising, Internet, marketing. For more advertising and marketing help, news, resources and information visit our Home Page.


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