A music revolution and tank hacking
OUT-LAW Radio, 13/09/2007
We talk to the founder of the music world's anti-label, which
allows you to choose how much to pay for music, and find out how to
stop a tank being hacked.
A text transcription follows.
This transcript is for anyone with a hearing impairment or who
for any other reason cannot listen to the MP3 audio file.
The following is the text spoken by OUT-LAW journalist Matthew
Magee.
Hello and welcome to Out-Law Radio, the weekly podcast that
keeps you up to date on all the twists and turns in the world of
technology law.
Every week we bring you the latest news and in depth features
that help you to make sense of the ever-changing laws that govern
technology today.
My name is Matthew Magee, and this week we talk to a man who is
revolutionising the music business by letting customers decide how
much to pay for song, and we look into a system designed to stop
tanks being hacked.
But first, the news:
L’Oreal sues eBay over counterfeits; and
IT Project overrun cost UK £256m.
eBay is being sued across Europe by the world's biggest
cosmetics firm for not trying hard enough to battle counterfeiting.
L'Oreal is taking the action in five European countries, including
the UK.
The cosmetics giant claims that eBay is profiting from the sale
of counterfeit goods and is not doing enough to combat fakes. eBay
has argued in the past that it always acts in such cases when
notified of the sale of counterfeits.
Action has been taken in France, the UK, Germany, Spain and
Belgium over cosmetics which are sold under brands such as Lancôme,
Giorgio Armani and Ralph Lauren.
The issue of fake goods on sale on eBay is not a new one. Luxury
goods group Louis Vuitton Moet Hennessy and iconic jeweller
Tiffany's have both taken action against the online auction site
over similar claims.
One third of IT projects run over budget, costing the UK economy
£256 million, according to computing giant CA. One IT projects
expert has said that the problems could be contained by separating
two critical aspects of major projects.
CA has published a survey of 100 IT directors which showed that
executives in charge of large projects feel that they do not have
sufficient control over them and that they often are not even sure
what stage the project has reached. The survey found that a typical
company is running 29 projects at any one time.
David Barker, a partner at Pinsent Masons, the law firm behind
OUT-LAW, said that companies should consider hiring one firm to
create a specification, and another to actually run the programme,
to avoid the poor planning, which dogs many large projects.
That was this week's out-law news
No industry has been as radically, gravely and in some cases
catastrophically affected by new media technologies as the music
business.
Traditional major record labels stuck their heads in the sand,
refusing to acknowledge that online delivery could be an exciting
new route to market. It took music piracy on a staggering scale to
shock them into action, and that action when it came was defensive
and reactionary.
Meanwhile wave after wave of technologists built ever more
ingenious systems through which people could download and swap
music that they had not paid for.
Out of that scrappy mess came the compromise that is iTunes, a
music sales system that owes little to the new economic flexibility
that internet technology offers.
Fears about copyright violation have crippled the major labels,
but dotted around the world are small pockets of inventive
resistance to that stifling fear. One such pocket is Magnatune, a
small Indie record label which has broken every intellectual
property protection rule in the book. The US-based label is
thriving and is on the cusp of launching a music-by-subscription
service which it hopes will change the way its artists' fans listen
to music.
Founder John Buckman explains the thinking behind Magnatune.
Buckman: The idea was simply to try and come up
with some sort of business model that may help sustain
interesting music. I had friends who were classical musicians, for
example, who were finding it was just pay to play to get records
out, so classical musicians have to come up with a fair of money
just to put a record out. Then they give all the rights to a
label. I had two ideas: one is a consumer business based on ethics
with the slogan “We are not evil”.
Magnatune's entire approach appears to be based on a philosophy
of trusting the listener, and encouraging them to listen to and
share music. Its most radical move is that it allows you to choose
how much you pay for music - a downloaded album has no fixed
price.
Buckman: For example when you choose to buy we
ask you how much would like to pay for this album, so somewhere
between £5 and £18, and we mention that 50% of whatever price you
pay will go to the artist. It turns out actually that people are
quite generous and on average they pay about £8.40 even though they
really do not anything more for paying more other than feeling that
they are doing the right thing.
But the reality is today no one actually needs to pay for music
at all. If you choose then they hit the buy button at Magnatune
that means you are one of the people who has decided to actually
pay for music and shouldn’t we reflect that on its behaviour back
and say “Well, if you are actually one of the honest people then
how much do you want to pay?”
Its methods solve other problems music fans have with major
label downloads: there is no intrusive copy control technology,
files are full CD-quality, and if you lose your entire collection
when your computer blows up, Magnatune will send you a new copy of
everything you bought. The company actually requests that you share
everything you have bought with three friends, and it gives half of
all revenue to the artist.
Buckman is no doe-eyed idealist, though; he describes himself as
a born entrepreneur who as a child traded sweeties for profit at
school. He founded then sold email list management company Lyris so
needs no lessons in how to run a company. He spotted that while
consumer sales were all very well, a massive two thirds of record
company money comes from licensing music to films, ads, television
and shops.
He decided to revolutionise the murky licensing world with a
new, transparent, automated online licensing model. Crucially, he
says, he wanted to provide an alternative to royalty-free CD’s of
poor quality library music.
Buckman: I noticed that licensing was actually
where two thirds of the revenue is, companies paying for music
rather than music being sold as a CD. That’s really where all the
money is. In fact most of the music we consume is paid for by other
parties. We are the only company on the planet that was licensing
on the web. What that means is you go to a website you pick some
music you like you tell them I am going to use so and so when a
price comes up and they ask you for a credit card. I mean, that
sounds like a no brainer in terms of internet commerce but that is
just not how it is done. The way it is done is, lets say you are a
filmmaker and you want some music, you would call the attorneys of
the record label and you negotiate a price and your lawyer
talks to my lawyer that typically costs at least £20,000 and what
people do is they buy these really cheap royalty free CD’s,
typically for $99, that have really just lousy music on them. So
those are the two polar opposites right now for licensing is either
super cheap junk or quite expensive contracts lawyer type
approach.
The world of film music licensing is where Magnatune wants to
be. Though it has found it an impossible world to break into,
Buckman said that he is beginning to field Hollywood’s calls.
Buckman: We are starting to see some mainstream
Hollywood interest; that probably means, you know, one every month
and that's certainly nice. It's more and more people who are doing
eccentric things. What we found though is though the editors and
the creative types inside the studios might be very pro Magnatune
they are not really the decision makers, it is usually the big boss
man and, to an extent that I had under estimated, music licensing
is still very much a buddy network where you call that friend that
you used work with or who you met at the bar who simply arranges
for music that you want.
Magnatune's business is changing, though. The company allows web
users to listen for free to all its music online. Buckman said that
that service is now outstripping song downloads, and that in the
past two years its streaming audience has increased three fold to
45,000 a day, while its sales have halved.
He is now about to launch a set of services to take advantage of
changing listening patterns, including a premium service for forty
dollars a month for which a user could listen to all the music,
download anything they like and have their favourite ten albums
posted to them on CD every month.
Buckman: What I am finding actually is in an
era now where we are all connected to the internet, a lot. People
actually do not really want to download music because you do not
have to manage it right you have to download it and make sure that
you do not lose it if your computer blows up you have to go
re-download it. It seems that what people want is simply access to
music.
Buckman says his four person company is solvent and covers its
costs, which is impressive in such a difficult market. He said he
just wants to provide an alternative for people who love music.
Buckman: So the idea behind Magnatune was
simply: if one wants to innovate in the music business it occurred
to me the only way to really innovate as a small player was to get
my own music, and that was really the first thing, was if I get my
own music maybe I will be able to figure out what actually
works.
You might think you have problems when your e-mail server is
hacked into and you cannot get a vital tender out on time, or send
that crucial presentation to the boss. But your troubles are
nothing compared to those of a soldier on a battlefield who
suddenly realises his tank has been hacked.
It has, apparently, happened. Israeli news sources reported last
year that Hezbollah claimed it gained an advantage in fire fights
when it hacked Israeli battlefield communications systems, helping
them to thwart tank attacks.
Well, one IT security company has identified the military as a
major market and is now selling a ruggedised version of its
corporate firewall system called Sidewinder, for use in battle.
Mike Smart is a product manager with that company, Secure
Computing.
Smart: It is basically a ruggedised
version of the Sidewinder products. It is an actual unit which the
Sidewinder firewall technology runs on if you like. Ruggedised
typically is for military or mobile installations and it is
designed to withstand impact and be dropped out of planes and
parachutes and all sorts of things. So it is really designed for
field operations if you like.
You may be surprised to learn that tanks can be hacked at all;
it is hard to imagine soldiers logging into their web mail on
manoeuvres. But Smart said that modern military systems are as
connected as a San Francisco coffee shop.
Smart: There are systems in the tanks now it is
now no longer just levers and accelerators, there is a whole host
of technology in tanks, computers and various information: GPS, you
name it, it is probably are in there. And so, clearly that is all
IT related and needs to be protected.
The product does have military roots. Secure computing is a spin
out of Honeywell, the long established computing company that,
Smart says, was asked by the US military years ago to build an
operating system specifically for military use. Years later, that
system is still fighting battles, beating off the digital
invaders.
That's all we have time for this week, thanks for
listening.
Why not get in touch with out-law radio? Do you know of a
technology law story? We'd love to hear from you on radio@out-law.com.
Make sure you tune in next week; for now, goodbye
Out-law radio was produced and presented by Matthew Magee for
international law firm Pinsent Masons.
