Amazon and Time Warner Cable riled the music and TV industries last week by introducing a couple of minor innovations into the marketplace.
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.
Brigands were everywhere in the 1970s, as a diminution of AT&T’s monopoly permitted the attachment of new devices and services to the previously sacrosanct telephone lines (see Wu’s pages on the “Carterfone” decision and MCI). But starting in the 1980s, the PC and the related, computer-based devices that would follow—cellular phones, MP3 players, palm-sized still and videocameras, GPS devices, et al.—shattered the old order’s hegemony. Oh, the old guard has smothered a few technologies. At the behest of label and artists, it crippled the digital tape recorder (DAT) in the late 1980s with anti-copy laws and taxes, and your TiVo is similarly restricted.
But as my Samoan attorney conveys via email, entrenched tech and media companies have been unable to keep up with the business brigands who have invented and then exploited wave after wave of new technology. A short list of brigand-enabling technology would include cheap microprocessors, cheap data storage, disc-burners, MP3 compression, cheap scanners, webcams, CSS decryption, Wi-Fi, smartphones and other ultraportable computers, broadband Internet, and mobile broadband. Brigands have used these technologies to topple the recorded-music industry, sink the porn biz, kill the ticket scalper who used to loiter around the stadium, upend the map trade, rattle the publishing industry, move prostitutes off the street, demolish the print classifieds, unbundle the newspaper, unbundle the CD, and jailbreak your iPhone, and they’re coming to take over higher education, drive the DVD into extinction, and throttle your landline telephone.
At almost every step, the established order has tried to use the courts to stop the brigands. The Recording Industry Association of America brought suit against an early MP3-player manufacturer but lost in 1999. The same industry snuffed the Napster file-sharing service in 2001, but that “victory” was like moving a visible forest fire to an underground seam of coal where it burns invisibly and uncontrollably. (Practically every tune that you might wish to hear can be found for free if you know where to look.) When Cablevision put its DVR in the cloud, the TV channels sued for copyright infringement but lost in 2009.
The brigands have prospered because they take chances and because they have Moore’s Law on their side. Technology companies also now have equal or superior clout (translation: lobbyists) in Washington and in the courts, as my Samoan attorney puts it. The old-fashioned legislative throttles and legal flypaper no longer deter tech brigands. Their motto is “See you in court,” and their confidence is stoked by the fact that recent history is on their side.
Don’t get me wrong: I’m not an intellectual property anarchist. I’m not even much of a brigand except for when I get a belt-full of coffee. But you don’t have to be an anarchist or a brigand to sense the power shift. And I sense the greatest battle is yet to come, when the brigands turn on one another. Google vs. Facebook. Oooooooooo.
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