The swashbuckling bastards are everywhere, destroying the old order!
Amazon announced its Cloud Drive, a 5 GB locker for customers to store their music, e-books, video, and other files for free, and the Amazon Cloud Player, for playing those music files. The music industry is irate because it insists that Amazon and other cloud companies must obtain licenses from the music labels for their celestial jukeboxes.
Television's content providers are angry with Time Warner Cable for streaming cable channels to subscribers' iPads via an app. TV network execs say Time Warner Cable doesn't have the contractual right to stream programs. In their minds, it's not a TV unless a cord comes out of it and it's plugged into the wall. Time Warner Cable's reaction? It shrugs. "I already bought these rights," a Time Warner Cable executive told the New York Times.
The Amazon and Time Warner Cable moves are only the latest application of what I call techbrigandry, the now-common practice of technology companies unsettling markets with new technologies or new uses of old technology. In the Amazon instance, the company isn't doing anything all that new—MP3tunes.com entered the music locker and player racket last decade. The new trick that Time Warner Cable has taught its customers' iPads isn't that different from what the Slingbox has been doing at greater distance. Cablevision, Verizon, and Comcast all have similar iPad apps in the works.
I call them tech brigands not because they violate the law—which brigands do as a matter of definition—but for the swashbuckling way they assault the established order. The most high-profile tech brigands at work today are the boys and girls at Google. They make the folks at Amazon and Time Warner Cable look like crew-cut conservatives by comparison. "Google's leadership doesn't care terribly much about precedent or law," a top Google lawyer tells Steven Levy in his new book, In the Plex: How Google Thinks, Works, and Shapes Our Lives.
A guiding principle at Google has been to observe traditional business and intellectual property boundaries by driving its search engine over them. With its YouTube site, Google redefined the meaning of "fair use" under copyright law, drawing a lawsuit from Viacom in the process and winning the first round. Its Google Books project, an attempt to scan all the books in the world and monetize those petabytes, has fared less well in court. Meanwhile, the company's brazen behavior has gotten it into Dutch over such separate issues as privacy, telephone regulation, surveillance, and patent infringement.
Google and the other tech brigands don't get away with playing rough just because they want to. They do so because technology has moved faster than established entertainment and communications businesses—and the courts—have been able to co-opt and shackle them. At every technological turn in the last 130 years, the established companies have used patent laws, regulation, and vertical integration to maintain their positions. (Tim Wu's recent book The Master Switch: The Rise and Fall of Information Empires contains this essential history.)
Strong patents in such early tech businesses as telephony, motion pictures, and radio gave the pioneering companies leverage in repelling competitors. Later, as their patents ran out, some companies like AT&T used state and federal regulation to maintain their positions. As long as technological change was slow, companies could use the regulatory apparatus, patents, and market position to channel and control innovation. RCA and to a lesser degree CBS became vertically integrated tech and content creation businesses. RCA manufactured radios (and later televisions), broadcasted through its NBC subsidiary, and operated a music label. CBS had both a broadcast network and a music label, and invented the modern 12-inch long-playing record.
These companies never really stopped innovating, but they did so at a conservative pace. For example, in the late 1960s, both RCA and CBS spent millions on developing home video player prototypes. RCA had SelectaVision and CBS had the EVR. Both systems offered playback only, but neither made it to market. EVR's inventor, Peter Goldmark, accused CBS President William S. Paley of killing the system because it threatened CBS's broadcasting business. The withdrawal of RCA and CBS made room for the brigand Sony—which didn't have to worry about damaging a TV network's ratings because it didn't own one—to commercialize the U-matic VCR and later the Betamax VCR.