Silicon Hutong

Hollywood Icon Comes East

In the Hutong
Rolling with the changes
1842 hrs.

The Hollywood Reporter, long essential morning reading for the entertainment industry in the United States, Europe, and elsewhere, has had permanent roots in China for a couple of years now, with an official bureau led by Jonathan Landreth. The THR staff have provided a much-needed addition to the coverage of the music, film, television, and new media industries here in China. With occasional exceptions, however, much of the fine reporting coming out of THR in China has been trapped behind a firewall.

That all changed today, when THR launched The Hollywood Reporter Asia, a website that not only allows us to see the superb coverage coming out Jonathan and his team here in China, but also regional and global industry news. One other thing I really like about THR-Asia is that it is edited right here in Beijing, underscoring Beijing's growing role as the media center of the region.

Give it a look. Personally I'm adding it to Danwei.org as part of my daily routine. If I have one quibble, it is the lack of an RSS feed, but I understand that with THR offering their content for free, they want you in the site for the ads. A small price to pay.

eKarma: Have a little Virus, Pirates

Third Ring Road East
Breathing deep the inversion layer
1022 hrs.

Steven Schwankert of Village Grouch fame wrote an excellent piece for IDG (picked up here in The Washington Post) describing how Chinese fans seeking to download illegal copies of Ang Lee's excellent film "Lust, Caution" are finding on their hard drives not a copy of the film, but with software that pops a nasty little trojan virus into their systems.

There are several interesting aspects to this story.

Virus? What Virus?

First, it was apparently found and addressed by Kaspersky Lab and Rising Software well before it came up on the collective radar screens of Symantec, McAfee, and TrendMicro. One wonders why this is the case, particularly given that Symantec and McAfee tout the value of their software in part based on their global scanning for viral threats. I am especially concerned about TrendMicro, who have a huge presence in China and who make a great deal about their expertise as an "Asian" security company.

It also suggests that the malware threat in China is growing and diversifying. From dorm rooms filled with budding software engineers, to the challenges facing the country's law enforcement teams, to the quiet but rapid growth of China's cyberwar military-industrial complex, the country has become as much a haven and spawning ground for creators and distributors of Malware as the United States or any other country. This would seem to argue for greater investment by the computer security vendors in local labs who can not only find but anticipate new threats.

As an aside, it would also seem that companies like Symantec are destined to become major defense contractors. But we digress.

The Empire Strikes Back

Second, it seems that Hollywood (including the music and TV people as well as the film side of the business) and the software industry may have inadvertently discovered a way to slow online piracy and perhaps even the growth of downloaded content. All the studios - or, better yet, the MPA and the Business Software Alliance - need to do is hire a few good hackers to come up with some particularly nasty viruses and spread them around online disguised as illegitimate digital copies of random applications, movies, and music files.

Sure, the viruses would not deter the most determined or careful downloaders, and the anti-virus companies would inevitably come up with fixes. But imagine, for a moment, the fear, uncertainty, and doubt this would wreak among the less-expert. The mere possibility that these files would include viruses would be enough to drive a lot of marginal downloaders away from illegitimate downloading (and probably a few away from legit downloads as well).

Naturally I would expect clearer heads in the PR and legal departments of these organizations to prevail, ensuring that neither Hollywood nor the software industry would ever actually subsidize - or even publicly condone such practices. But you can easily imagine how such an option must tempt some people in places like Redmond and in the Black Tower.

Indeed, if the matter of digital rights management has proven anything, it has proven that Hollywood and many large software concerns believe that extremism in the defense of intellectual property is no vice, and that goodwill is readily sacrificed in that battle. If anything will keep hackers from high-powered lunches at the Ivy or the Fulton Fish market, it is the fear of court costs.

Nonetheless, it is fascinating, if not a bit disconcerting, to think that there is a commonality of interest between the creators of malware and the creators of movies.

Engineer, Engage the FUD Pump

What I do expect is that the IPR-driven industries will kick into gear a semi-coordinated propaganda effort to ensure that stories like the "Lust, Caution" become as widely known as possible, so that the threat is seen as being far larger and more serious than it really is. This costs them little, supports their goals magnificently, and enables the studios and developers to position themselves as defenders of the public interest.

Which, frankly, is the smarter way to handle it. You steal, you pay. Or, you pay, we protect.

For all the failings implicit in Hollywood's approaches to the IPR issue and digital entertainment, let's not lose sight of the most important fact - downloading illegal files is theft, theft is wrong, and anyone who does so willfully probably deserves a hard drive filled with malware.

Music Does Matter - Especially When It Is Mobile

In the Hutong
Dreaming of clear sinuses and carbohydrates
1958 hrs.

Lots of big music industry folks down at Music Matters in Hong Kong last week. For those of you not familiar with the confab, it is basically an opportunity for everyone who touches the music business to sit down and talk about the business in Asia.

The attendees included EMI, Mercury Records, Sony BMG, Universal Music, and Warner Music Group, along with a host of other companies in different parts of the industry.

It's Like a Royal Navy Symposium, circa 1740

Naturally, at the top of everyone's agenda was piracy, and that got a lot of play. Reading the coverage each music executive sounded like a cross between Babbit and Marvin the Paranoid Android, spinning tales of woe about how they are all getting ripped off by those bad kids ripping their pirated CDs.

Research house Synovate contributed their little bit to the gloom, with survey results from around the region suggesting that one out of five of Asia's young urban consumers purchased a bootleg CD in the last month, and one in four downloaded an illegal song from the Internet. Synovate's stuff is interesting, but all it offered was a snapshot rather than some inkling of how some of those numbers might be evolving.

The downer of the session likely came from industry group IFPI, who estimate that piracy costs the music business $400 million annually around the region.

Now, that's not good, certainly, and we here in the Hutong are scrupulous - nay, anal - about legitimate content. But with clients and family in what has become affectionately known as "the Biz," I'll grant we are no test case.

Nonetheless, there is a sunny side to the music business in Asia, and the folks at the record labels appear to have a lot more to be happy about than the movie, television, and shrinkwrapped-software crowds.

The Music Industry Eats Its Wheaties in Asia

Brian Bremmer at BusinessWeek did a nice write-up on the program ("Asia's digital Music Free-for-All",) and he points to the PriceWaterhouse Coopers study that estimates Asia's digital music industry at over $4.2 billion. In other words, if you believe the stats, digital music sales alone, not counting sales of CDs or cassettes, is four times LARGER than the total estimated piracy losses in the region. Think the MPA would kill for those kinds of stats? You bet. And the digital music industry is supposed to rise to over $9.35 billion in Asia.

(Okay, so can we fess up to the idea that digital media is not such a terrible thing after all? That while it eases piracy and cuts down on album sales because people are just buying the tracks they want, that it really is a significant market?)

And you need to look at what is driving the market: mobile phones. PWC says that 85% of that $4.2 billion were songs downloaded directly to music-enabled mobile phones. Half of the people MTV surveyed in Asia said they would listen to music more if they had a mobile music device like a music-enabled handset.

The Future of Music is Mobile

You look at all of these numbers, and you are led to a couple of inescapable conclusions:

1. Piracy sucks and still exists in Asia. (It still exists in America, for that matter, but we digress)

2. The future of music in Asia is mobile, and it's a robust business already with huge growth prospects. Any artist, label, distributor, or retailer not doing everything they can to make legitimate music more accessible to Asia's one billion (and growing) mobile device owners is both ignoring their future and giving the business away to pirates.

The challenge is for the industry to work together to make listening to music an increasingly fast, easy, and delightful experience. The model is there and its working. Now the challenge is to broaden the appeal.

It's absolutely stunning Apple didn't own this event. My friends at Apple need to get their collective act together. The music lovers in this region are shopping at other vendors and building that habit. Don't wait for long, guys. The market sure won't.

Shuttleworth Joins Anti-DRM Chorus

Africa's first astronaut and open source supporter Mark Shuttleworth, the man with the money behind Ubuntu Linux, has added his voice to the growing choir of senior executives calling for the end of digital rights management.

It is a good piece and worth the read, even if there is not much new.

Diagnosis Correct. Cure?

Mark Shuttleworth is a can-do, solutions oriented kind of guy. I greatly admire what he is doing (making Linux, formerly The OS Only A Geek Could Truly Love, into The OS that You Can Love if You Hate Windows But Can't Stomach OS X). Truth is, I've got Ubuntu running alongside OS X on my Macintosh for no better reason than to support what Shuttleworth is doing.

What I would have expected from someone with his entrepreneurial drive and technical acumen is something more than "DRM sucks - deal with it, entertainment business." I would have hoped he'd at least start to focus on possible ways for artists - and maybe a few entertainment companies - to continue making a living in a world where they're being asked up their last stitch of property protection.

No Pay, No Play

Nobody really likes DRM. Nothing pisses me off more, for example, than the fact that all of the DVDs I purchased in Australia are unreadable on my region 1 encoded computers. Note, if you will, that I (or someone) paid full retail price for every DVD I own. I'm fine with not buying pirated DVDs here in China, and I'm even okay with avoiding DVD shops here because you really never know what's legit and what isn't. But I'm pissed off that if I go to an HMV in Hong Kong or Singapore or Japan and buy legit DVDs there, I can't play them.

But I understand why those things are there. And I also understand that if you walk up to an artist or an entertainment executive and say "look, you need to throw all of your work out into the public domain, like shareware, and put everyone on the honor system to pay for it," they're going to throw you a right hook, and rightfully so.

Stop the Posturing

When people get scared - or feel threatened - the automatic reaction is to put the wagons into a circle, or create what the voortrekkers of Shuttleworth's native South Africa once called a laager. The entertainment business is scared. The wagons are in a circle, the lawyers at the ready.

What needs to happen is for somebody with vision and intelligence to step forward and start talking about transition, a way to put the entertainment industry on a path to wean them from DRM, but at the same time to come up with other stuff that lots of people will pay for around the music, television, film, and other works that are no longer protected.

There's going to be no silver bullet. It's going to be a lot of different business models in the end, but you aren't going to get from here to there by waving a scary future in the face of everyone in the entertainment industry around the world.

Great post, Mark. Nice Op-Ed, Steve Jobs. Get DOWN on your bad selves.

Now, enough with the posturing - and that goes double for the suits at the RIAA and the MPAA. It's time to start building bridges to the future.

Let's get on it.